Reuters News - Fed's Fisher says gradual rate rises won't 'brake' U.S. economy

Richard Fisher, president of the Federal Reserve Bank of Dallas, speaks on ''U.S. Economy and Monetary Policy: Where to From Here?'' during at luncheon in Hong Kong April 4, 2014.

CREDIT: REUTERS/TYRONE SIU

(Reuters) - The U.S. economy is 'in a pretty good place,' Dallas Federal Reserve Bank President Richard Fisher said on Wednesday, adding that he believes it will soon be ready for gradual interest rate increases but stopping short of saying when.

"I don’t think it would be much of a brake on the economy if we had a gradual increase in interest rates," Fisher told Reuters in an interview.

As to when the Fed should start raising rates, he said, "My personal opinion is that the calendar has been moved forward, at least in my mind - how far forward, I couldn’t tell you right now."

The U.S. central bank has kept interest rates near zero since December 2008 and has bought trillions of dollars in Treasuries and housing-backed securities to push down longer-term borrowing costs and boost economic growth and jobs.

With the economy gaining steam, the Fed has been winding down stimulus and gradually preparing markets for an eventual rate rise. Investors and economists currently expect the Fed to begin raising rates by mid-2015, although some Fed officials have been pushing for an earlier start to rate rises.

Fisher, a policy hawk who has opposed the Fed's bond-buying, surprised some observers in July when he voted with the majority of his colleagues to keep adding stimulus to the economy, albeit at a reduced level.

On Wednesday he reiterated his view that the Fed should completely wind down its stimulus by October, and at that point take stock of both the economy and whether the Fed's easy monetary policy is stoking financial instability.

Fisher said he is not worried that inflation is still a bit below the Fed's 2 percent target rate. It's important, he said, for the Fed to not wait too long to raise rates. Doing so, he said, could force the Fed to hike rates more steeply and in a "jerky" fashion.

And while some of his colleagues have said they would rather err on the side of staying easy too long than to risk raising rates too soon and hurting the recovery, Fisher disagreed.

"I am more disposed to making sure that we are ahead of the curve," he said.

Fisher said the Fed is "getting closer" to completing revisions to an exit strategy from near-zero rates that was first published in June 2011, and said he would support releasing the blueprint "at the earliest opportunity."

The release, he said, should coincide with a regular news conference by Fed Chair Janet Yellen.

Yellen's next news conference will be after the Fed's Sept. 16-17 meeting, with one more for this year scheduled for mid-December.

(Reporting by Ann Saphir; Editing by Andrea Ricci)