February 27, 2014 / 4:50 PM / 6 years ago

UPDATE 1-Fed's Fisher says happy with pace of QE withdrawal

* Will continue to vote for measured reductions of QE

* Refine forward guidance before considering rate hike

* Junk bond yields fallen “too much”, but no sign of bubble

By Sakari Suoninen and Eva Taylor

FRANKFURT, Feb 27 (Reuters) - Dallas Federal Reserve Bank President Richard Fisher said on Thursday he would like the U.S. central bank to continue scaling back its monthly bond-buying stimulus at the current pace of $10 billion at each policy meeting.

If U.S. economic growth picked up significantly, Fisher said, he “of course might be in favour of further reduction”, but even if he did support such a step, he said he knew he “wouldn’t win the argument”.

“Reducing the amount we’re adding ... is as much as I could have hoped for, even though I have different views,” Fisher told reporters on the sidelines of a conference in Frankfurt, Germany.

“So I’m very happy with it, happy with the direction it’s going and I will continue to vote for these measured reductions until we get rid of the programme.”

Asked whether he expected interest rates to rise already next year, Fisher said that depended on “how the economy develops”.

“Speaking for myself, I think we still have a great deal of further refinement ... of when we might deal with the overnight rate,” Fisher said, possibly by adding another indicators.

The Fed has promised to keep rates near zero until well after the U.S. unemployment rate falls below 6.5 percent. The jobless rate currently stands at 6.6 percent.

Fisher, a former hedge-fund manager who is now among the central bankers most worried about the risks posed by easy money policies, said junk bond yields had come down “too much”.

“In junk bonds, we’re seeing an uber-narrow spread over uber-narrow rates. These are what I call pin pricks in fabric; they’re not tears. I don’t think these are signs of bubbles that are broadly threatening financial stability, but I think they need to be observed,” Fisher said.

“As a market operator, which I was for a significant part of my career, I ran a fund, these are the kinds of things that would concern me.”

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