The Fed Chairwoman Janet Yellen said in her prepared remarks before the House Financial Services Committee that further interest rate hikes will depend on the incoming economic data, adding that interest rate hikes will be gradual.

She noted that there is a risk from developments abroad to the U.S. economy.

"The economic outlook is uncertain. Foreign economic developments, in particular, pose risks to U.S. economic growth," Yellen said.

The Fed chairwoman also said that "financial conditions in the United States have recently become less supportive of growth".

Yellen pointed out that a drop in stock markets, higher borrowing rates for riskier borrowers, and a further appreciation of the U.S. dollar could weigh on the outlook for economic activity and the labour market in the U.S.

She expects inflation to reach 2% target over the medium term, while the labour market is expected to continue to strengthen. Regarding the U.S. labour market, Yellen added that there remained some slack in labour markets.