During a two-hour confirmation hearing before the Senate Banking Committee, Yellen embraced her so-called "dovish" reputation and expressed strong support for the Fed's low interest-rate policies. And she warned critics that any potential harm those policies pose are outweighed by the risk of leaving a still-weak economy to survive without them.
"I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy," she said.
Yellen faced tough questions, particularly from Republicans. But she also drew praise from senators in both parties and is expected to be confirmed by the full Senate, becoming the first woman to lead the powerful central bank.
A committee aide said that Banking Chairman Tim Johnson, D-S.D., plans a vote as soon as possible, potentially next week.
"We have the utmost respect for you," Sen. Joe Machin, a centrist Democrat from West Virginia, told Yellen.
Her testimony represented a strong defence of the Fed's policies pursued under Chairman Ben Bernanke, which were launched to combat the Great Recession and the financial crisis.
The latest efforts include spending $85 billion a month on bond purchases, which are intended to lower long-term interest rates and promote faster economic growth.
The Fed has also said it plans to keep its key short-term rate near zero at least until unemployment falls to 6.5 per cent. The rate is now 7.3 per cent.
Some Republicans expressed concerns at the hearing about the bond purchases, which have swelled the Fed's balance sheet to $3.8 trillion. They are worried that the money flooding into the financial system is inflating stock and real estate prices. And that could be creating asset bubbles, which would have a disastrous impact on the economy if they burst.
"I think the economy has gotten used to the sugar you have put out there and I just worry that we are on a sugar high. That is a very dangerous thing," said Sen. Mike Johanns, R-Neb.
Yellen repeatedly assured senators that the Fed is mindful of those risks. But she cautioned that there were other dangers if the Fed pulled back prematurely. The economy could weaken further and unemployment could rise.
Pressed by Republicans to specify when the central bank might begin scaling back the bond purchases, Yellen didn't bite.
She said Fed policymakers assess the risks and benefits of the bond purchase program each time they meet.
"The committee is looking for ... signs of growth that are strong enough to promote continued progress" in the labour market. She said "there is no set time that we will decide to reduce the pace of our purchases."
The Fed has said that it wants to see stronger data before it reduces the stimulus. Recent reports have been encouraging.
The government said last week that the economy added 204,000 jobs in October, and many more in the previous two months than initially reported. And the economy grew at a 2.8 per cent annual rate from July through September, the fastest pace in a year.
Yellen told senators that the economy has regained ground lost to the Great Recession. But it still needs the Fed's support because unemployment remains too high.
She also praised Bernanke for his "wise and skilful leadership."
The Fed has a dual mandate to keep inflation low and fight high unemployment.
Yellen and Bernanke are considered to be among the more "dovish" members of the Fed. Those are officials who believe the Fed should be more focused now on job creation because unemployment is high and inflation is mild. But so-called "hawks" have expressed worries that the Fed's policies are raising the risk of higher inflation down the road.
Private economists viewed Yellen's comments as a strong signal that Bernanke's policies will continue at the Fed.
"Janet Yellen's responses in the Senate Q&A session were as dovish as expected," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
The central bank's last meeting of the year is Dec. 17-18 and it will meet again in January, which will be Bernanke's last meeting as chairman. He steps down on Jan. 31 after eight years at the helm.
Many economists believe that the earliest the Fed would begin reducing the bond purchases is at the March meeting. That would be Yellen's first as chairman, presuming she is confirmed by then.
The timing of a full Senate vote remains uncertain. Some senators have said that they plan to hold up the nomination as leverage to gain Senate action on other matters.
David Vitter, R-La., announced after the hearing that he will vote against her nomination. Yellen is likely be opposed by several other Republicans who have criticized the Fed's policies.
But Yellen will probably win support from most Democrats and a handful of GOP senators.
Democratic Sen. Sherrod Brown of Ohio said after the hearing that he would support Yellen, calling her "the most qualified person for this job."
Tennessee Republican Bob Corker, often a critic of the Obama administration's bank regulation efforts, seemed upbeat about her performance on Thursday. He applauded her for "candour and transparency," thanking her for giving the same answers during the hearing that she gave him during a private meeting in his office.
Sen. Charles Schumer, D-N.Y., told Yellen she would make a great Fed leader.
"Your Brooklyn wisdom shines through," he said in a nod to where she grew up.