FRANKFURT (MNI) – A U.S. unemployment rate stuck at 8.2% and
“pretty significant” downside risks to the economic growth outlook
stemming from the ongoing Eurozone debt crisis “would argue for further
action” on the part of the U.S. Federal Reserve, San Francisco Fed
President John Williams told the Financial Times.
Williams, however, stopped short in calling for direct action from
the Fed. “I think the argument against further action is the question of
uncertainty around the effects, the costs and the benefits of doing so,”
he said in an interview posted online Sunday.
Should the Fed decide to embark on a new round of quantitative
easing, Williams suggested that purchases of mortgage-backed securities
rather than Treasuries would be more effective.
“There’s a lot more you can buy without interfering with market
function and you maybe get a little more bang for the buck,” the FT
quoted Williams as saying.
Williams also noted the benefits of an open-ended QE program, which
could be adjusted as needed, depending on economic conditions. “The main
benefit from my point of view is it will get the markets to stop
focusing on the terminal date and also focusing on ‘Oh, are they going
to do QE3?,'” he said.
— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —
[TOPICS: MT$$$$,M$$CR$,MMUFE$]
