An open-ended round of quantitative easing that could be adjusted to suit economic conditions should be considered if the Fed launches a fresh round of monetary stimulus, a top policy official in the Federal Reserve said in an interview with the Financial Times.
There is "pretty significant" downside risks to the U.S. economy from the euro zone crisis, John Williams, president of the Federal Reserve Bank of San Francisco, said in an interview with the Financial Times on Monday.
"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 is quoted as saying.
If the Fed launched another round of quantitative easing, Williams said that buying mortgage-backed securities, rather than Treasuries, would be more advantageous.
"There's a lot more you can buy without interfering with market function and you maybe get a little more bang for the buck," he said.
He said the Bank of England's "funding for lending" scheme, which will provide cheap funding for British banks that increase their lending to households and businesses, would not work in the United States.
Williams is regarded as close to the center of gravity on the rate-setting Federal Open Market Committee, of which he is a voting member this year. The FOMC will conclude its next meeting on August 1.
(Reporting by Stephen Mangan; Editing by Stacey Joyce)