The Fed is not behind the inflation curve and the economy is not overheating, but allowing the economy to run persistently hot is risky, unwise and could drive inflation higher, according to Janet Yellen speaking to a California policy institute. Yellen is citing fiscal policy as a key factor for the economic outlook but argues the size, timing, and composition of coming changes are uncertain. Yellen expects further strengthening for this year's labor market and a bit further decline for the unemployment rate. She also sees a gain for capital spending. Yet she describes wage gains as subdued and said inflation, held back by swings in both oil and the dollar, isn't likely to surge as the labor market strengthens. She also doesn't see economic growth accelerating much in the near term. Her citing of fiscal unknowns adds details to her prior comments on the outlook, otherwise the speech is balanced and keeps in place expectations for a modest series of rate hikes this year. In questions and answers, she described risks to financial stability as "moderate" and said leverage isn't particularly high. She also said the pace of credit growth has not been that rapid.