Federal Reserve Chair Janet Yellen said on Wednesday U.S. interest rates will need to rise as the economy recovers even though risks to the Fed's inflation target are currently to the downside rather than the upside.

"I hope it's completely clear that while monetary policy is very accommodative at this point ... as the recovery proceeds and healing occurs, it's obvious that we will need to tighten monetary policy to avoid overshooting our target," she told the Economic Club of New York in answer to a question.

"Overshooting that goal, we have learned in past episodes, in past recoveries, can be very costly to revert."

(Reporting by Jonathan Spicer and Walden Siew; Writing by Krista Hughes; Editing by Chizu Nomiyama)