Bonds News

Weak growth calls for "aggressive" policy: Fed's Williams

NEW YORK, Feb 24 (Reuters) - A lackluster U.S. economic recovery calls for aggressive monetary policy action, San Francisco Federal Reserve Bank President John Williams said on Friday.

While he stopped short of calling for additional monetary easing, Williams hinted that he would not be averse to further stimulus from the U.S. central bank.

Williams was discussing a paper on monetary policy presented at a conference sponsored by the University of Chicago Booth School of Business.

“The paper’s executive summary notes that current ‘headwinds...may require a more aggressive monetary response than in normal downturns’. I agree,” Williams said.

In particular, he indicated a preference for a return to buying mortgage bonds, which would have the added advantage of helping to support a key sector of the economy that remains crippled.

“Purchases of mortgage-related securities appear to have reduced mortgage rates significantly, making them particularly useful given the weakness in the housing sector,” Williams said.

The Fed had been debating fresh action in recent months, but a stronger round of economic data has dampened expectations that it will embark on a third round of bond buying or quantitative easing.

Last month, the central bank said it would likely keep interest rates near zero until at least late 2014.