Fed's Williams says could be "pretty strong" case for QE3

CHICAGO (Reuters) - There would be a strong case for the U.S. Federal Reserve to undertake a third round of quantitative easing, or QE3, if there was no improvement in current economic conditions, a top Fed official said on Monday.

"If inflation continues to stay very low, and unemployment very high, I think a pretty strong case could be made" to try to boost the economy with fresh purchases of long-term securities, John Williams, president of the San Francisco Fed, told reporters after a speech at Claremont McKenna College.

Because the Fed is navigating "unchartered waters" in monetary policy, the central bank will need to weigh greater-than-usual uncertainty around forecasts of unemployment and inflation, and consider whether a giant Fed balance sheet could fuel inflation, he said.

In the end, he said, "it would depend completely on where the U.S. economy is going."

(Reporting by Ann Saphir; Editing by John Maie)