While Dr Yellen said the US economy was making progress, she failed to repeat earlier comments that a rate hike would be appropriate in "coming months".
"I continue to think that the federal funds rate will probably need to rise gradually over time to ensure price stability and maximum sustainable employment in the longer run," Dr Yellen said.
Fed watchers have taken the omission of "coming months" as a signal that Dr Yellen is no hurry to raise US rates after disappointing payrolls data showed US jobs grew at the slowest pace in six years in May.
Speaking in Philadelphia, Dr Yellen described the jobs outcome as "concerning" but said it was too early to draw meaningful conclusions about implications for the wider US economy.
"One should never attach too much significance to any single monthly report," Dr Yellen told reporters.
"If the May labor report was an aberration or reflects a temporary slowdown resulting from the weakness in economic activity at the start of the year, then job growth should pick up and support further gains in income."
Dr Yellen's softer comments are seen as significant ahead of the Fed's highly anticipated June meeting next week.
US rates have been kept steady at between 0.25 percent and 0.5 percent since last December when the Federal Reserve moved higher from near zero levels introduced at the height of the global financial crisis.
Since December, Dr Yellen has repeated that future rate rises would be "gradual" and depending on jobs growth and inflation rising closer to the Fed's target of two percent.
Wall Street investors applauded the apparent rates reprieve having already factored in the likelihood of a June rate rise after earlier hawkish signals from Fed members before the May jobs disappointment.
The Dow Jones Industrial Average closed 0.64 percent or 113 points higher on Dr Yellen's dovish comments while the US dollar fell to its lowest level in four weeks against major currencies.
Dr Yellen said she is monitoring "four areas of uncertainty" including the economic growth rate in China and the "Brexit" referendum on June 23 over Britain's membership of the European Union.
The focus on US rates comes as Australia's Reserve Bank holds it's June meeting after delivered a May rate cut on Federal Budget day.
While money markets are factoring in five percent chance of another cut, the focus will be on the statement after last week's better than expected economic growth figures for the March quarter.
However, most economists expect the RBA board will wait on the June 28 consumer inflation reading before deciding on whether to deliver a follow up rate cut in August.