Yellen says a couple more rate increases are needed so labor market doesn't 'overheat'

Former Federal Reserve Chair Janet Yellen said Tuesday more interest rate hikes are needed in order to avoid the economy running too hot.

"At this point, a couple more interest rate increases are necessary to stabilize growth at a sustainable pace and stabilize the labor market so it doesn't overheat," Yellen told CNBC's Steve Liesman at the Charles Schwab Impact conference in Washington, D.C.

Yellen also said sees the Fed funds rate averaging about 3 percent over the next 10 years. In order to get there, the Fed would have to hike three more times.

The Fed has hiked rates three times this year and is mostly expected to raise rates once more in December. But the U.S. central bank has been heavily criticized by President Donald Trump for tightening monetary policy from historically accommodative levels.

Trump said on Oct. 10 that the Fed "has gone crazy" by raising rates so much in 2018.

Yellen disagreed with Trump's view on Tuesday, "The president obviously has the right to express his opinion," she said. "I think it's appropriate for the Fed to raise rates a bit more."

The former Fed Chair also warned the president's comments could be detrimental to the U.S. "It's been recognized that economies function better when central banks are allowed to make policy independently based on goals and objectives set by Congress."

CNBC's Hailey Lee contributed to this report.

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