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UPDATE 1-Fed's Lacker says U.S. data justifies less bond buying

Friday, 17 Jan 2014 | 2:46 PM ET

RICHMOND, Va., Jan 17 (Reuters) - Signs of an improving labor market justify further reductions in monthly bond purchases by the Federal Reserve, a senior official at the U.S. central bank said on Friday.

Richmond Fed President Jeffrey Lacker told journalists that a report showing weak U.S. hiring in December appeared to be "aberrational."

"It would take a very significant change in the outlook for me to support not tapering, and I don't think the data we've seen so far are close to that," Lacker said following a speech to risk managers.

He said a variety of labor market indicators, including the level of employment and the number of job openings, paint a picture of the sustained improvement in the job market outlook sought by the Fed.

"They all line up," Lacker said.

The Fed announced last month it was reducing monthly bond purchases to $75 billion from $85 billion. The program has aimed to spur a faster recovery from the 2007-09 recession. Investors expect the central bank will continue reducing monthly purchases throughout 2014.

Lacker also weighed in on the debate in policy circles over how the Fed should react to any signs of bubbles, saying it would be a mistake for policymakers to let worries over asset bubbles interfere with their inflation mandate.

"Deflecting monetary policy from its price stability mission to make up for market imperfections ... seems to me misguided," he said.