With the U.S. economy improving, the Federal Reserve announced on Wednesday that it will further reduce its bond purchases by 10 billion U.S. dollars starting February.

After scaling back the same amount of bond purchase in January, the U.S. central bank has decided to cut back on its monthly asset purchases from 75 billion dollars to 65 billion dollars, with 10 billion dollars trimmed equally from mortgage-back securities and Treasury bonds, the Fed said following a two-day policy meeting of the Federal Open Market Committee (FOMC), the Fed's powerful policy making panel.

The decision, which was unanimously approved at the first FOMC meeting in 2014, comes as the U.S. economic activity picked up in recent quarters, and labor market indicators were mixed but overall indicated further improvement, the Fed said in a statement.

"The unemployment rate declined but remains elevated. Household spending and business fixed investment advanced more quickly in recent months, while the recovery in the housing sector slowed somewhat," it said.

The Fed noted that fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee's longer-term objective, but inflation expectations in the long run have remained stable.

The central bank expected economic activity will expand at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. But it also recognized that inflation persistently below its 2 percent objective could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term.

If future information generally supports the Committee's expectation of labor market and inflation, the Fed said it will likely reduce the pace of asset purchases in further measured steps at future meetings, adding that decisions about their pace will remain contingent on the assessment.

To boost growth from the prolonged financial crisis, the Fed has kept its short-term interest rate at the historically low levels and completed two rounds of quantitative easing programs, known as QE1 and QE2 since 2008.

In January, with the economy showing steady signs of recovery, the Fed began to scale back the bond purchase stimulus in its transition to normal monetary policy.

Wednesday's meeting was presided over by outgoing Fed Chairman Ben Bernanke for the last time. On Feb. 1, Janet Yellen will take over. Enditem