The Federal Reserve could start shrinking its bond purchases as soon as September, Atlanta Fed President Dennis Lockhart told Market News International.

The tapering depends on an improving economy and falling unemployment, Lockhart told Market News.

"I, for one, would be quite prepared to delay or even reconsider" tapering quantitative easing (QE) if the economy does not improve, he said.

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"You have to sort of weigh the sense of imperative that has been established versus what the economic performance really turns out to be."

He expects the unemployment rate to fall to 7 percent in mid-2014.

While tapering could start in September, the Fed could also starting winding down bond purchases later in the year, said Lockhart, who is not a voting member of the Fed's policy-setting committee.

The Fed also has policy meetings in October and December, although Fed Chairman Ben Bernanke does not have a press conference scheduled after the October meeting.

Richard Fisher, president of the Federal Reserve Bank of Dallas, said that with unemployment now down to 7.4 percent the Fed is "now closer to execution mode."

The central bank must be careful not to disrupt financial markets, Fisher said in a recent speech at the National Association of State Retirement Administrators conference in Portland, Ore.

"This is a delicate moment. The Fed has created a monetary Gordian Knot," Fisher stated, according to his prepared remarks.

The Fed now owns $2 trillion of Treasury securities and $1.3 trillion of agency and mortgage-backed bonds. Its balance sheet now totals $3.5 trillion, and it continues to buy $85 billion of Treasuries and mortgage bonds a month.

"We have to be careful in deploying the fuel we create, for like all fuels, ours is combustible," Fisher added. "Employed recklessly or without safeguard, it can lead to an explosion of inflation. If we are too miserly, we risk an implosion of deflation."

By pushing down interest rates, its bond purchases have helped re-energize the housing market, boost auto sales and allowed businesses to obtain low-rate loans.

However, the purchases have created a risk of future inflation, savers have been hurt by low returns from bank CDs and Treasury bills and the jobs recovery has been lackluster, he said.

"On this crucial front — the second leg of our dual mandate — we do not seem to have achieved much with the trillions of dollars we have poured into the economy through our three QE programs."

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