Fed's Williams backs easing, open-ended QE3

(Reuters) - More easing from the Federal Reserve would help boost the U.S. economic recovery and keep the labor market from stalling out, a top central bank policymaker said on Friday.

San Francisco Fed President John Williams said on CNBC television the Fed's two quantitative easing programs have had benefits and argued the Fed should be moving toward an "open-ended" QE3 in which the new program would not be limited by a dollar value.

"Additional monetary accommodation would be very useful to boost the economy, speed the recovery along somewhat, and help get unemployment moving toward its full employment goal over the next few years," Williams, a voter this year on Fed policy, said.

"I am concerned that we could be stalling at the current high level of unemployment."

Williams was interviewed at a central bankers' conference in Jackson Hole, Wyoming, just before Fed Chairman Ben Bernanke gave a much-anticipated speech in which he said that progress in reducing unemployment had been too slow.

Bernanke stopped short of giving a clear signal of further policy easing, despite expectations that the central bank could launch a third round of quantitative easing at its September 12-13 meeting.

Fed policymakers have considered the usefulness of an open-ended QE, if they ultimately decide to adopt such a program. Both QE1 and QE2 were connected to specific dollar values and timeframes, seen by some as lacking the flexibility to react to economic changes.

"A basic principle of good monetary policy is you adjust policy based on what's happening in the economy and the outlook," Williams said. "The open-ended approach allows you to do that better, I think."

Without further policy action, growth will stay near 2 percent this year and rise a bit next year, he added, while the unemployment rate should stay near the current 8.3 percent at least for another 18 months.

(Reporting by Jonathan Spicer; Editing by James Dalgleish)

Source: http://news.yahoo.com/fed-ease-help-economy-feds-williams-132248555--business.html

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