Bernanke: Fed can't stave off economic slowdown this year

With interest rates near zero, "monetary policy does not have the capacity to fully offset an economic headwind of this magnitude." 

Bernanke told lawmakers that instead of focusing on near-term budget cutting, Congress must take "more aggressive action to address the long-term issues that puts the budget on an unsustainable path."

"The objectives of effectively addressing longer-term fiscal imbalances and of minimizing the near-term fiscal headwinds facing the economic recovery are not incompatible," he told the panel. 

"To achieve both goals simultaneously, the Congress and the administration could consider replacing some of the near-term fiscal restraint now in law with policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run."

Bernanke argued that the still fragile economic recovery would have been "much weaker without the aggressive monetary policy" of the Fed, but said that "monetary policy is not omnipotent" and is unable to do all the work to boost growth.

He said the after effects of the financial crisis, the ongoing fiscal crisis in Europe, fiscal policies in Washington and the struggles throughout the housing market have all held back a stronger recovery.