President George W Bush has said the US economy is not heading towards recession but is in a "slowdown".
President Bush said the economy had slowed down
He said tax measures, which are due to start in May, were designed to get consumers shopping again.
But Federal Reserve chairman Ben Bernanke, said keeping the economy growing was becoming more difficult.
Mr Bernanke said its job of encouraging growth was harder than in 2001, when the US suffered a recession, because of rising inflation and energy prices.
Rising energy prices were creating "inflationary stress", he said.
These were "complicating" the Fed's attempts to bolster the economy according to Mr Bernanke, as measures to control inflation may dampen economic growth.
In his first day of evidence to the US Congress on Wednesday, he hinted the Fed would cut rates further to ease fears of recession.
Mr Bernanke was speaking as government figures showed the economy expanding at its slowest rate since 2002 and the price of oil continued to rise. It hit over $100 dollars a barrel in trading in New York.
He predicted the US would avoid 1970s style stagflation, when soaring rates of inflation accompanied a slowing economy.
"I don't think we're anywhere near the situation that prevailed in the 1970s," he told the Senate Banking Committee. "I do expect inflation will come down."
He predicted the price of oil, metals and food would stabilise in the coming months. "If it doesn't, we will have to react to it," he said.
The central bank chairman also predicted a number of small US banks would go out of business due to the financial turmoil which began with problems in the housing market.
President Bush, who was speaking at a White House press conference, was more positive about the prospects for the economy.
"There is no question the economy has slowed down," he said. "I don't think we're headed into a recession, but there is no question we are in a slowdown."
Last month Congress passed a $150bn (£75bn) stimulus package which will mean millions of Americans receive tax rebates ranging from $300 to $1200.
It is hoped it will give the economy a boost by encouraging consumers to spend.
President Bush rejected calls for a second package of measures, telling reporters at the White House press conference: "why don't we let the stimulus package we have a chance to kick in".
Democrats in Congress are trying to pass additional measures to provide aid to those homeowners facing foreclosure on their mortgages as a result of the sub-prime crisis.
President Bush said exports were "essential" to US economic growth and rejected calls to opt-out of the North American Free Trade Agreement (NAFTA) if Canada and Mexico refused to renegotiate the pact.
"There are a lot of farmers and businesses, large and small, who are benefiting from having a market in our neighbourhood. And the idea of just unilaterally withdrawing from a trade treaty... is not good policy," Mr Bush said.
Responding to a question about the weakness of the US dollar, he said: "We believe in a strong dollar policy".