The economy expanded at a 1.3 percent annual pace in the second quarter after a 0.4 percent rate in the first three months of the year, according to the Commerce Department. Analysts surveyed by Bloomberg last month projected a 1.8 percent rate of growth in the third quarter, based on the median estimate.

"The recovery from the crisis has been much less robust than we had hoped," Bernanke said. Fed officials expect a "somewhat slower pace of economic growth over coming quarters" than they did in June, he said, without giving a specific forecast.

Stocks pared losses after Bernanke's comments. The Standard & Poor's 500 Index fell 1.5 percent to 1,083.21 at 10:23 a.m. in New York. The yield on the 10-year Treasury note fell two basis points to 1.74 percent.

U.S. stocks last week finished their worst quarter since the financial panic of 2008, burdened by concerns over a potential Greek debt default and chances the U.S. will relapse into recession. The Standard & Poor's 500 Index dropped 14 percent through Sept. 30.

Yields on 10-year Treasuries have risen from a record 1.67 percent on Sept. 23. Still, the difference between yields on 10- year and 30-year Treasuries has narrowed to less than 1 percentage point for the first time since July 2010.

The Federal Open Market Committee, in a statement accompanying last month's 7-3 vote on Operation Twist, cited "significant downside risks to the economic outlook, including strains in global financial markets."

Bouts of Volatility

Bernanke acknowledged "bouts of elevated volatility and risk aversion in financial markets" on investor concern over debt in the U.S. and abroad. While "European leaders are strongly committed to addressing" their debt crisis, fiscal issues still "pose ongoing risks to growth," he said.

U.S. growth "remains slow," the FOMC's statement said. A report yesterday showed American manufacturing accelerated in September as production picked up. The Institute for Supply Management's factory index was 51.6 last month, the highest since June while below this year's peak of 61.4 in February.

Bernanke said faster inflation this year "does not appear to have become ingrained in the economy" and cited a recent decline in what traders expect for inflation in five to 10 years. The FOMC said inflation "appears to have moderated since earlier in the year" as prices of energy and some commodities have fallen. The Fed's preferred price index, which excludes food and fuel costs, rose 1.6 percent in August from a year earlier, up from 1 percent in March.

The housing market, which the Fed said is "depressed," is showing little sign of rebounding even with a record-low average 4.01 percent interest rate on the 30-year fixed-rate mortgage. The annual pace of new-home sales in August was 295,000, just above the record-low rate of 278,000 in August 2010. That's less than one-fourth of the 1.39 million pace in July 2005.