The Federal Open Market Committee's extension of Operation Twist will have a "relatively modest impact on the economy," and if further Fed moves are needed, it should buy "longer-maturity securities, including agency mortgage-backed securities," San Francisco Federal Reserve Bank President John Williams said Monday.

Although the economy is improving, the unemployment rate remains "much too high" and growth "far short" of numbers needed to cut the jobless rate, Williams told a joint convention of the Idaho, Nevada, and Oregon Bankers Associations, according to prepared text released by the Fed. "What's more, the economy has lost some momentum in recent months as gains in consumer and business spending have slowed. In addition, financial markets are once more under strain in response to the flare-up of the European crisis."

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