Federal Reserve Chair Janet Yellen says tightening financial conditions driven by falling stock prices, uncertainty over China and a global reassessment of credit risk could throw the US economy off track from an otherwise solid course.

Speaking at her semi-annual appearance before the House Committee on Financial Services yesterday, Yellen said there are good reasons to believe the US will stay on a path of moderate growth that will allow the Fed to pursue "gradual" adjustments to monetary policy.

She says family incomes and wealth are rising, domestic spending has continued to advance, and business investment outside the oil sector accelerated in the second half of the year.

But Yellen said some of the weaknesses in the global economy have become self re-enforcing, with weak growth in major manufacturers like China and oversupply on commodity markets rattling the world's oil and mineral exporters.