WRAPUP 1-Two Fed officials favor aggressive easing options
* Evans says economy needs much more policy support
* Rosengren: Should aggressively counter deflation threats
* Evans says Fed should consider price-level targeting
* Rosengren votes this year, Evans next year on Fed policy
BOSTON, Oct 16 (Reuters) - Two top Federal Reserve officials argued for further aggressive action by the central bank, with one saying the economy needs "much more" help and the other pointing to Japan's painful lessons.
With nearly one in ten in the U.S. labor force unable to find work and already very low inflation threatening to drop further, the U.S. central bank is expected to offer the economy more support at its next policy meeting on Nov. 2-3.
Most analysts expect the Fed will embark on a fresh round of Treasury purchases, over and above the $1.7 trillion in longer-term assets it has already bought.
"In my opinion, much more policy accommodation is appropriate today," Chicago Federal Reserve Bank President Charles Evans told a conference hosted by the Boston Fed, repeating an argument he made earlier this month.
Boston Fed President Eric Rosengren, speaking at the same event, said Japan's drawn-out battle with deflation shows prevention may be easier than the cure, and policymakers should respond aggressively before "pernicious" deflation takes hold.
"Insuring against the risk of deflation may be much cheaper than waiting until it has occurred and then trying to address it," said Rosengren, who has a darker view of the economic outlook than some of his colleagues at the central bank.
"A gradual response may not be as effective as a more active response to arrest deflationary pressures before they become embedded in thinking that can affect household and business spending," he said.
U.S. inflation unexpectedly slowed in September even as retail sales picked up, keeping pressure on the Fed to act soon to lessen the risk of a downward price spiral. [ID:nN15191048]
Record low interest rates in rich countries, and the prospect of the Fed pumping more dollars into the economy, are funneling huge capital flows into high-yielding emerging markets, pushing up their currencies. The resulting currency tensions are expected to be a live issue at meetings of the world's top finance officials in South Korea next week.
Rosengren and Evans' recent remarks put them squarely in the camp that says monetary policy can and should do more to support the economy.
Fed Chairman Ben Bernanke, speaking on Friday, appeared to be sympathetic to their views as he gave his most explicit signal yet that more easing is on the horizon.
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