Fed's Fischer says tighter labor market pushing up wages

The Federal Reserve should avoid raising interest rates too much, Fed Vice Chairman Stanley Fischer said on Tuesday, adding that gains in U.S. incomes are a sign that workers are benefiting from a tighter labor market.

"I don't want to raise the interest rate too much," Fischer told students at Howard University. He said rates should rise but that "I don't know when" that should happen.

The U.S. central bank left rates steady at a policy meeting last week, but policymakers including Fed Chair Janet Yellen signaled a hike was likely by the end of the year.

Fischer, the Fed's No. 2 official, said the recently-reported increase in median household income in 2015 was a sign that the low U.S. jobless rate was pushing wages higher.

"We are beginning to see the fruits of a higher pressure labor market," Fischer said.

Speaking at one of America's traditionally black colleges, Fischer urged students there to study economics and inject more diversity into the profession.

More diversity could help inform study of economic mysteries like the decline over the last half century in labor force participation by men in their prime working years, Fischer said.

The Fed has come under fire for the dearth of minorities in its upper echelon. Only one of its 17 policymakers is from a minority group - Neil Kashkari, the president of the Minneapolis Fed, is the son of immigrants from India. None of the policymakers are black or Hispanic.

Fischer said the Fed was trying to increase diversity within the central bank. "These are steps on what will be a long road," he said.

(Reporting by Jason Lange; Editing by Paul Simao)