Fed may need to buy more mortgage bonds: Williams

Chicago Fed President Charles Evans last Thursday said he would be "aggressive" in seeking more help for the economy through the purchase of such bonds.

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Further bond purchases by the Fed would amount to a third round of quantitative easing, a controversial move that drew criticism both at home and abroad the last time the Fed took that path.

The need for more easing is far from a consensus view within the Fed. Four top Fed officials have publicly noted their opposition to the central bank's most recent move to ease, signaling last month that it will keep interest rates near zero through late 2014.

The hawkish Richmond Fed President Jeffrey Lacker, the only one of the four with a vote on the Fed's policy-setting committee this year, dissented, and said he believes rates will need to rise before then to keep inflation in check.

St. Louis Fed President James Bullard, who is known as a policy centrist, said on Monday that he believes the Fed should start raising rates next year.

The U.S. central bank has already pushed far into uncharted territory to pull the economy free of the worst downturn in generations.

Last month it signaled a move Williams was careful to characterize as the Fed's "best judgment" given current economic conditions and not a promise.

The Fed has already kept interest rates near zero for more than three years, and has bought $2.3 trillion in Treasuries and mortgage-backed securities to push borrowing costs down further.

Chairman Ben Bernanke has said the Fed should consider doing even more for the economy, if unemployment stays high and inflation keeps falling.

Although U.S. unemployment fell last month to 8.3 percent, Williams said he projected high unemployment for years to come, with the rate staying above 8 percent until well into next year and remaining above 7 percent through the end of 2014.