The Federal Reserve could soon begin reducing the pace of its bond-buying stimulus if recent improvement in the U.S. job market persists, the president of the Cleveland Fed, Sandra Pianalto, said on Wednesday.

Even though job growth in July was below economists' forecasts, Pianalto focused on recent strength.

"Employment growth has been stronger than I was expecting, and the unemployment rate today is more than half a percent lower than I projected it to be last September," she said in an address to the Center for Community Solutions Annual Human Services Institute.

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"In light of this progress, and if the labor market remains on the stronger path that it has followed since last fall, then I would be prepared to scale back the monthly pace of asset purchases."

The U.S. economy created 162,000 jobs last month, the smallest amount in four months and below a consensus forecast of 184,000. But the jobless rate fell to 7.4 percent from 7.6 percent, the Labor Department reported last week.

U.S. Treasury yields have spiked sharply since Fed Chairman Ben Bernanke first hinted at a possible "tapering" of bond purchases in May and June.

However, in line with recent pronouncements from a number of Fed officials, Pianalto was careful to note that a pullback in bond buying was not a sign of imminent interest rate hikes.

"The labor market is (not) fully recovered," she said. "So even when the asset purchase program is scaled back, the Federal Reserve will remain committed to supporting employment growth and price stability."

Fed officials say that, as long as inflation stays low, they will not consider raising interest rates until the jobless rate hits 6.5 percent.

Currently, the Fed is buying $85 billion in mortgage and Treasury bonds per month in an effort to keep long-term rates low and support a weak economic recovery and nascent housing rebound.

"Clearly, they will taper later this year but they haven't decided when," Joseph LaVorgna, chief U.S. economist at Deutsche Bank in New York, said. "The economy is doing a lot better than when they started QE. They will not single out a meeting at this point and they don't have to."

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