Federal Reserve chief Janet Yellen acknowledged the recent string of weak economic data and commented on regulation and fiscal policy during her testimony in front of the Senate Banking Committee Thursday.

“A number of data releases have pointed to softer spending, and part of that softness may reflect adverse weather conditions. It’s difficult to discern how much,” she said.

The central bank head noted she and her Fed colleagues will continue to monitor the data and how it could potentially impact the Fed’s monetary policy when it comes to tapering its asset-purchase program, QE3.

Yellen said despite the weaker-than-expected data over the last month, she believes the U.S. economy is continuing on its track toward recovery.

"We see accommodative monetary policy as remaining appropriate for quite some time. There's no conflict at all at the moment between the two goals the Congress has assigned to us of promoting maximum employment and price stability," she told lawmakers.

Weekly employment data out Thursday morning showed an unexpected rise in the number of Americans filing for first-time benefits, while the latest monthly picture was similarly disappointing, with only 113,000 jobs added for the month of January, far lower than what economists forecast.

On the topic, Yellen said the 6.5% unemployment-rate target the Fed has cited doesn’t  represent so-called “full employment” and that the central bank will likely begin boosting its benchmark interest rate well after the that level is reached.

“The unemployment rate is not a sufficient statistic to measure the health of the labor market.  An additional 5%, an unusually high fraction of our labor force, is working part time for economic reasons ... and we have an unusually high fraction of Americans who are unemployed and have been for substantial amounts of times,” she said.

The Fed chief reiterated asset purchases are not “on a preset course,” and said a significant change in the economic outlook would cause the central bank to reconsider its taper timeline. Still, Yellen declined to “jump to conclusions” during Thursday’s testimony.

Recently, the Fed has been paring down its bond purchases at a rate of $10 billion a month, with the central bank now targeting purchases of $65 billion a month.

In a nod to Congress, Yellen said she hopes the U.S. government and its squabbling over fiscal policy over the last two years would not continue to stand in the way of economic improvement.

"Fiscal policy really has been quite tight and has imposed a substantial drag on spending in the   U.S. economy over the last several years,” said Yellen.

“The drag is likely to lessen substantially during the current year, but nevertheless there remains some drag. Of course it is true that because there has been fiscal policy drag the burden on monetary policy has been larger."

To her point, the federal government has stepped out of the fiscal spotlight for the time being. Congress passed an omnibus $1.1 trillion budget for fiscal 2014 back in January, and avoided a major showdown on the nation’s borrowing limit earlier this month when lawmakers voted to raise the debt ceiling, allowing the U.S. to continue borrowing through March 15, 2015.

The Fed chief also said the central bank is working on how to regulate large insurance companies. Such institutions, like American International Group (AIG), are tightly linked to the health of the financial system, but are different from banks the Fed overseen for many years.

"We are looking very carefully to design an appropriate set of rules for companies with important involvement in insurance to recognize that there are very significant differences between the business models of insurance companies and the banks that we supervise and we are taking the time that is necessary to understand those differences and to attempt to craft a set of capital and liquidity requirements that will be appropriate to the business models of insurance companies,” Yellen noted.

The freshly-minted Fed chief’s appearance is the second portion of her semi-annual report to Congress. It was rescheduled after a major snowstorm slammed Washington D.C. two weeks ago.

Follow Victoria Craig on Twitter @VictoriaCraig.