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Federal Reserve Chair Janet Yellen, testifying on current economic conditions and monetary policy, told the Senate Banking Committee Tuesday that further adjustments of the federal funds rate may be warranted if labor market conditions and inflation continue to strengthen.

NAFCU Chief Economist and Director of Research Curt Long said her comments may leave the door open for a possible rate hike next month.

The Federal Open Market Committee, the Fed's monetary policy setting arm, decided to leave the federal funds target rate and policy unchanged during its meeting that wrapped up earlier this month. In December, the FOMC voted to raise that rate target to the range of 0.5 to 0.75 percent. The FOMC meets again March 14-15.

"Incoming data suggest that labor market conditions continue to strengthen and inflation is moving up to 2 percent, consistent with the Committee's expectations," Yellen said during Tuesday's hearing. "At our upcoming meetings, the Committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate."

"Chair Yellen provided an upbeat assessment of recent economic progress," said Long. "While she left herself and the rest of the FOMC plenty of room to maneuver, she did suggest that a March rate hike is on the table. Investors remain somewhat skeptical, but a strong jobs report in three weeks could tilt expectations toward a move."

Futures company CME Group had the market odds of a March rate hike at 13 percent prior to Yellen's testimony yesterday. After the hearing, the odds increased to 18 percent. Yellen also said projections from the FOMC regarding rate hikes for the coming years seem to be holding up, which include three quarter-point rate hikes in 2017, three in 2018 and three in 2019.

The need for regulatory relief for credit unions also came up at yesterday's hearing as both Republican and Democratic members of the panel expressed support for rolling back regulations on small community financial institutions.

Committee Chairman Mike Crapo, R-Idaho, noted, "We want our nation's banks to be well-capitalized and well-regulated, without being drowned by unnecessary compliance costs. This is especially important for community banks and credit unions, which lack the personnel and infrastructure to handle the overwhelming regulatory burden of the past few years, yet in many ways are treated the same as the world's biggest institutions."

Ranking Member Sherrod Brown, D-Ohio, said there are bipartisan steps that can be taken to help "small banks and credit unions."

Yellen will deliver her semiannual monetary policy report today before the House Financial Services Committee.