The president of the Federal Reserve Bank of San Francisco said Wednesday the U.S. central bank may resume expanding its balance sheet to boost the economy if its recovery loses momentum or inflation stays below two percent.

Speaking at the Bishop Ranch Forum in San Ramon, Calif., John C. Williams said if either of those happen, the Fed could restart its program of purchasing mortgage-backed securities that would likely be the best way to provide a boost to the economy.

The U.S. central bank already has purchased $1.75 trillion of securities in a bid to revive the nation's economy.

The policy actions the Fed takes from here will depend on how economic conditions develop, and they will change as economic circumstances change, Williams said in a statement. I want to assure you that the Fed will do its level best to achieve the goals of maximum employment and stable prices.

While Williams highlighted the recent improvement in unemployment, he predicted the unemployment rate will linger above eight percent into 2013 and interest rates will stay near zero through late 2014.

Compared to the pattern seen in past recessions, the economic recovery has been weak. And, despite relatively strong job gains in recent months, the unemployment rate remains very high, said Williams, adding, I expect the pace of economic growth to be frustratingly slow and the unemployment rate to remain high for years to come.