Yellen will testify amid predictions of slower rate hikes

The Federal Reserve raised its benchmark interest rate from record lows, and it signaled the likelihood of four more hikes in 2016.

Panicky financial markets, global weakness and slumps in key U.S. economic sectors have since clouded the outlook for more rate increases.

The Fed has long awaited faster wage growth for evidence that the job market is as strong as the steady hiring gains and low unemployment rate (now 4.9 percent) would suggest.

"If you look at the economic data that has come out since December, it shows considerable weakness," said Sung Won Sohn, an economics professor at the Martin Smith School of Business at California State University.

Fischer took note of the market turmoil, diminished oil prices and strengthened dollar and said, "If these developments lead to a persistent tightening of financial conditions, they could signal a slowing in the global economy that could affect growth and inflation in the United States."

David Jones, an economist and author of several books on the Fed, said: "Yellen is going to emphasize that the Fed is watching global market volatility very closely to determine if that volatility becomes severe enough or lasts long enough to dampen U.S. economic growth."

Some analysts say the fallen stock prices and the dollar's higher value, which slows growth by reducing exports and shrinking corporate profits, represent the equivalent of perhaps a 1 percentage point increase in rates.

"All the market indicators are flashing yellow," said Brian Bethune, an economics professor at Tufts University, who also expects just two rate increases in 2016 beginning in the second half of the year.