(Reuters) -Federal Reserve Governor Christopher Waller on Friday said he opposed the U.S. central bank's decision this week to slow the pace of reduction of its securities holdings because the level of reserves in the banking system remains abundant.

"Reducing the Federal Reserve's balance sheet is an important part of normalizing monetary policy implementation and reducing unneeded reserves in the banking system," Waller said in a statement explaining his dissent on the balance sheet decision included in the policy statement issued by the central bank on Wednesday.

"Slowing further or stopping redemptions of securities holdings will be appropriate as we get closer to an ample level of reserves. But in my view we are not there yet because reserve balances stand at over $3 trillion and this level is abundant," he said.

"There is no evidence from money market indicators or my outreach conversations that the banking system is getting close to an ample level of reserves," Waller said.

The latest weekly data shows that reserve balances at the Fed banks have been little changed recently at about $3.4 trillion.

At a two-day meeting this week, Fed policymakers decided to reduce the monthly cap on the runoff of Treasuries from the Fed's balance sheet to $5 billion, from $25 billion, starting in April. The monthly cap on the runoff for mortgage-backed securities was left at $35 billion.

The decision was triggered by concern that an impasse in Congress over lifting the government's borrowing limit could obscure how much bank reserves are actually shrinking, risking potential market disruptions once lawmakers eventually raise the debt limit. Fed Chair Jerome Powell said the slowdown would allow for a smoother and longer period of balance sheet rundown and was strongly supported by most policymakers.

Waller said that instead of slowing the balance sheet runoff, the Fed should develop a plan to address short-run strains should they occur.

The central bank has a number of tools that it could use in such a case, he said.

(Reporting by Dan Burns; Editing by Paul Simao)