WASHINGTON—Federal Reserve Chairwoman Janet Yellen kept the door open to another increase in short-term interest rates this year, but sounded a note of caution on still weak inflation in the U.S. and abroad.

The “ongoing strength of the economy will warrant gradual increases” in short-term interest rates, the Fed chairwoman said, although she didn’t specify when the next rate increase would come.

Gradual increases in the benchmark federal-funds rate “are likely to be appropriate over the next few years to sustain the economic expansion,” Ms. Yellen said Sunday at a Group of 30 banking seminar in Washington.

Fed officials are nonetheless watching price pressures closely, Ms. Yellen said, as the “biggest surprise in the U.S. economy this year has been inflation.”

At their last policy meeting Sept. 19-20, Fed officials left rates unchanged and penciled in one more rate rise in 2017. They expect three rate increases next year, two in 2019 and one in 2020. The central bank has raised its benchmark rate twice this year, in March and June, most recently to a target range of 1% to 1.25%.