FRANKFURT - A U.S. unemployment rate stuck at 8.2% and "pretty significant" downside risks to the economic growth outlook stemming from the ongoing Eurozone debt crisis "would argue for further action" on the part of the U.S. Federal Reserve, San Francisco Fed President John Williams told the Financial Times.

Williams, however, stopped short in calling for direct action from the Fed. "I think the argument against further action is the question of uncertainty around the effects, the costs and the benefits of doing so," he said in an interview posted online Sunday.

Should the Fed decide to embark on a new round of quantitative easing, Williams suggested that purchases of mortgage-backed securities rather than Treasuries would be more effective.

"There's a lot more you can buy without interfering with market function and you maybe get a little more bang for the buck," the FT quoted Williams as saying.

Williams also noted the benefits of an open-ended QE program, which could be adjusted as needed, depending on economic conditions. "The main benefit from my point of view is it will get the markets to stop focusing on the terminal date and also focusing on 'Oh, are they going to do QE3?,'" he said.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

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