* Williams has an 'open mind'; Kocherlakota says do more
* Massive bond-buying program was launched a year ago
By Ann Saphir and David Bailey
PORTLAND, Ore/LA CROSSE, WI, Sept 4 One top
Federal Reserve official said on Wednesday he was open-minded
about reducing stimulus this month, as investors largely expect
the central bank to do, while another policymaker said the U.S.
central bank should actually do more for the economy.
The comments by San Francisco Fed President John Williams
and Narayana Kocherlakota, his counterpart in Minneapolis,
reflect the uncertainty that lingers over financial markets two
weeks before the Fed's 19 policymakers meet to decide whether to
adjust a $85-billion monthly bond-buying program.
The quantitative easing program, known as QE3 because it is
the Fed's third such massive effort to boost growth and
employment since the Great Recession, was launched a year ago.
U.S. unemployment was 7.4 percent in July, down from 8.2 percent
a year earlier, suggesting to many economists that the Fed is
ready to reduce the pace of buying.
Still, Williams, a policy centrist speaking before a group
of business and community leaders in Portland, Oregon, said he
has not yet made up his mind.
"I'm going into this meeting with an open mind," he said,
adding that his view will depend not only on how the economic
data comes in between now and then - including the August jobs
report on Friday - but also on what his colleagues have to say.
Broadly, Williams said "the best course forward" is a plan
Fed Chairman Ben Bernanke articulated in June in which QE3 would
be trimmed later this year and ended by mid-2014, as long as the
economy grows as expected.
The Fed has been buying Treasuries and mortgage-backed
securities since last September to push down long-term borrowing
costs, and has promised to continue the program until there is
substantial improvement in the labor market outlook.
The central bank has also said it will keep interest rates
near zero until the unemployment rate falls at least to a
threshold of 6.5 percent, as long as inflation expectations
remain below 2.5 percent.
Kocherlakota, repeating a long-held stance, said the Fed's
own forecasts suggest it "should be providing more stimulus to
the economy, not less."
An outspoken dove, Kocherlakota noted that the Fed's
policy-setting Federal Open Market Committee (FOMC) expects
inflation to remain at or below 2 percent over the next few
years, and that unemployment will decline only gradually.
"These forecasts imply that the Committee is failing to
provide sufficient stimulus to the economy," he told an audience
at the University of Wisconsin.
Kocherlakota did not repeat - as he has in many previous
speeches in arguing for easier policies - that the Fed should
keep rates low until unemployment falls to 5.5 percent, and not
the current threshold of 6.5 percent. Though he gave no hint he
had backed down from that stance.
Turning to his own economic forecasts, Kocherlakota said he
was hopeful U.S. joblessness would fall to between 5.2 and 6.0
percent, with inflation around 2 percent, before five years from
now. By that time, he said, more Americans should have jobs than
now, but probably not as many as in the boom year 2007 because
the overall population is aging.
Under the Fed's rotating system, neither of the men have
votes on policy this year. But Kocherlakota has a say next year
and Williams regains a vote in 2015.
Meantime in Washington, the Fed said the U.S. economy
expanded at a "modest to moderate" pace in most of the country
between early July and late August.
The Beige Book report, which is compiled from conversations
with Fed business contacts and was published on Wednesday, was
just strong enough to reinforce the prospect of a pullback in