Fed's Williams says central bank not near limit on bond buying -WSJ

Fri Nov 23, 2012 2:43am EST

Nov 23 (Reuters) - The U.S. Federal Reserve's securities portfolio has not reached a level where it would impede the central bank from carrying on with its bond-buying programs, John Williams, the president of the San Francisco Federal Reserve Bank, has told the Wall Street Journal in an interview.

The U.S. central bank's new bond-buying program begun in September calls for $40 billion in mortgage debt purchases per month, to be augmented as needed, until the Fed sees a significant improvement in labor market conditions.

"Our concern is to make sure our policies aren't creating problems with market-functioning," Williams said in an interview with The Wall Street Journal. ()

"In terms of how far you can go, I don't think that we're anywhere near any kind of limit...Conceptually, you could imagine some upper limit to this but I don't think we're getting anywhere near it," Williams told the paper.

Williams has been a strong supporter of the U.S. central bank's super-easy monetary policy and is a voter this year on the Fed's policy-setting committee.

The Fed's most hawkish policymakers criticized as misguided and risky the central bank's aggressive attempts to boost the U.S. economic recovery.

Williams told the Journal that he wanted to keep buying both mortgage-backed securities and longer-term Treasury securities at the present pace into 2013.

"A decision not to continue buying long-term Treasuries when Twist expires...would be a surprise to markets and that would be counterproductive.

"In my view it would push long-term rates up and cause financial conditions to be a little less supportive of growth," Williams said.

Under Operation Twist, which expires at year end, the Fed has been selling short-term securities to buy $45 billion in longer-term debt every month to push down long-term borrowing costs.

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