This morning, the Federal Reserve chairman is scheduled to begin the first of a two-day, mandatory testimony on Capitol Hill, during which he will likely be hit with a barrage of difficult questions on the state of the economy.

Ben Bernanke, who will testify before the House Financial Services Committee and repeat his remarks tomorrow to the Senate Banking Committee, will face Congress at a time when the economy is staggering under a torrent of bad news. The dollar’s value hit its weakest point in more than 40 years yesterday, while inflation skyrocketed to its highest level in more than 26 years; consumer confidence is at a five-year low, and the downward spiral in housing prices is persisting.

“This is probably Bernanke’s most important testimony since he’s become chairman,” the director of macroeconomics at Moody’s Economy.com, Augustine Faucher, said. “The picture has worsened dramatically over the last few months, and there is an election coming up.”

Mr. Bernanke, who has been a frequent visitor to Capitol Hill — today will be the 12th time he has faced a congressional panel since January 2007 — is expected to highlight the need to spur economic growth despite inflation risks, and hint at further cuts to the Fed’s key interest rate.

He is going to have a tough time, though, as the dollar fell below $1.50 a euro for the first time since the European currency was introduced in 1999, and reached roughly 950th of an ounce of gold. The greenback has lost about a quarter of its value in the past five years. The dollar index, which measures the greenback against a basket of currencies, was 74.80 yesterday, its lowest level since 1967.

“The last time the dollar was this low, Jimi Hendrix was on tour,” the director of equity research at Fusion IQ, Barry Ritholtz, said.

Meanwhile, the cost of commodities drove inflation to the highest level in more than 26 years, according to a report from the U.S. Labor Department yesterday. Its producer price index jumped 1% in January and 7.4% for the year, the biggest 12-month gain since 1982, when the economy was facing low growth and high inflation, known as stagflation. Some economists who fear the economy is headed in a similar direction are once again bandying about the phrase.

In other economic news, the Conference Board said its index of consumer sentiment fell to 75 in February, its lowest level since the start of the Iraq war five years ago.

The housing market continued its downward plunge, dropping 0.3% in the fourth quarter from a year earlier period, and plummeting 0.2% in December alone, marking the sixth consecutive monthly decline, according to the Office of Federal Housing Enterprise Oversight. Overall, prices have fallen 2.4% from an April 2007 peak. Standard & Poor’s also released its housing index yesterday, with home prices dropping 8.9% in the fourth quarter compared with a year earlier. This was the largest decline in the S&P/Case-Shiller index since it was launched 20 years ago.

“With all this negative data, Congress is going to be very tough on Mr. Bernanke,” Mr. Faucher said. “The Fed is always a good whipping boy for Congress. When the economy slows, they blame the Fed, then say its not doing enough.”

Today’s prepared remarks are expected to echo statements made yesterday by Federal Reserve Vice Chairman Donald Kohn, who admitted the Fed’s rate-cutting campaign “will not forestall a period of economic weakness in the near term.”

Mr. Bernanke is also expected to emphasize economic weakness. “He’s being as gloomy as a central banker could be,” a lead analyst and managing editor at research firm RGE Monitor.com, Christian Menegatti, said. “I don’t remember any Fed chairman ever saying we are in a recession, or even close to one. But clearly there is an indication that the Fed is worried.”

As for concerns over inflation, Mr. Kohn, speaking to students and faculty at the University of North Carolina, called the data “disappointing,” but added, “I do not expect the recent elevated inflation rates to persist.” He argued that the slowing economy would dampen demand for goods, putting downward pressure on prices, which would in turn offset inflation.

Mr. Kohn also signaled the possibility of further rate cuts, helping drive the sell-off in the dollar. On the rate cuts, he said, “Whether the Federal Reserve has done enough in this regard is a question this policymaker will be weighing carefully over the coming months.”

The Federal Open Market Committee is scheduled to meet on March 18, when it is expected to cut the key federal funds rate by 0.50%, to 2.5%.