LIVE: Janet Yellen testifies to the House Financial Services Committee

Federal Reserve chair Janet Yellen is testifying on the economy before the House Financial Services Committee this morning.

Her prepared remarks released earlier showed that the Fed is watching developments in markets and the economy very closely.

Committee chair Jeb Hensarling (R-Texas) kicked off the Q&A session with a question about whether the Fed's monetary policy approach is "traditional", as the statement noted, highlighting the Fed's massive balance sheet.

Yellen responded that the interest on excess reserves (IOER) is widely used by central banks as a key policy tool.

Maxine Waters (D-California) similarly wanted to know why the IOER, which she said pays "massive sums" to banks to hold their reserves, is particularly important, and what possible alternative policy approaches were.

Yellen noted that it would be disruptive to the economy to remove the IOER, adding that as short-term rates rise, banks are also paying more to gain funding they rely on. And this is would be transferred to benefit savers through higher deposit rates.

The prepared statement noted that the Fed is prepared to slow down the path of interest rate hikes if economic growth is worse than expected.

The Fed is also paying attention to China, as an economic slowdown there could see fears of a spillover that have been tossed around for a while now actually materializing in the US economy.

As we noted earlier, Yellen is expected to be grilled during the Q&A session on whether the Fed's decision to raise rates created economic and financial risks, what tools the Fed would use to deal with an economic slowdown, and whether a hike in March is still in play, among other things.

Keep it here, as we'll have live coverage of Yellen's testimony.