Bernanke said it would be a "nightmare scenario" if politicians decided to second-guess monetary policy.

"That is very concerning because there's a lot of evidence that an independent central bank that makes decisions based strictly on economic considerations and not based on political pressure will deliver lower inflation and better economic results in the longer term," Bernanke told the U.S. House of Representatives' Financial Services Committee.

The hearing was the likely last chance for retiring Texas Representative Ron Paul, known for proposing the Fed should be abolished, to grill the central bank chairman.

"Trillions and trillions of dollars (are) being printed out of thin air," said Paul.

The Republican-controlled House is on track to take up Paul's Fed audit legislation next week. The bill, which has been co-sponsored by more than half of all House members, looks set to clear that chamber, but not the Senate.

In response to a deep financial crisis and the worst recession in generations, the Fed brought official borrowing costs to effectively zero and bought some $2.3 trillion in Treasury and mortgage bonds in an effort to spur economic growth.

The results have thus far been mixed, with economic growth braking sharply this year after a strong finish to 2011 and the unemployment rate stuck at a still-high 8.2 percent.

The Fed has opened many of its operations, including details of emergency lending, to public scrutiny, although in some instances it did so only as a result of legislation or court order.

Paul's bill would direct the Government Accountability Office, an independent, nonpartisan congressional agency, to conduct a Fed review, and it would remove an exemption monetary policy has enjoyed.

Bernanke said the very notion of a monetary policy audit was misleading.

"The term 'audit the Fed' is deceptive. The public thinks that auditing means checking the books, looking at the financial statements, making sure that you're not doing special deals, and that kind of thing. All of those things are (already) completely open," he said.

(Editing by Phil Berlowitz)