Federal Reserve Chair Janet Yellen appears before the Senate Budget Committee to examine the nation's economic and fiscal outlook, on Capitol Hill in Washington, Thursday, May 8, 2014.

In testimony before a Senate committee on Thursday, Fed Chair Yellen said a minimum wage increase would likely have some negative effects on jobs, though it's not clear how large.

Still, boosting the federal minimum wage, which has remained at $7.25 per hour since mid-2009, would benefit some people, she added.

In recent months, the federal minimum wage has been a hot-button issue. In February, President Barack Obama boosted the minimum pay for federal contractors hired in the future to $10.10 per hour. He's also voiced his support for the federal level for all workers to rise to $10.10 from the current $7.25. Separately, organized protests of fast food workers have lobbied for a jump to $15.



Yellen also addressed concerns regard U.S. fiscal policy.

"Fiscal policy, while it has accomplished a very meaningful reduction in the budget deficit, as you pointed out has served as a drag on spending and aggregate demand in the economy and in a sense this has been part of the headwinds that the Federal Reserve has had to confront in designing our own monetary policy," she said.

(Click here to track the U.S. stock market following Yellen's testimony.)



Still, the U.S. economy is "looking at a significant reduction on the amount of drag we're expecting to see from fiscal policy," she said.

In the long run, Yellen stressed the importance of sustainability for policy policy and the nation's debt.

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Yellen's testimony on Thursday was a repeat of the remarks she delivered before a joint House-Senate panel a day earlier.

She also said she expects faster growth this year than last, but she cautioned that weakness in the housing sector could undermine that forecast if it proves protracted.



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She also warned of the possibility of "adverse developments abroad," such as heightened geopolitical tensions or an intensification of financial stress in emerging markets, and said that was a risk the U.S. central bank also needed to watch closely.