In Federal Reserve Bank Chairman Ben Bernanke's final policy meeting, the Open Market Committee said the quantitative easing program -- which was reduced from $85 billion per month to $75 billion in January -- will be further cut to $65 billion in February, a sign of continued confidence in the economic recovery.
In a statement, the Fed said economic activity had "picked up in recent quarters."
Data concerning the labor market were "mixed, but on balance showed further improvement," the Fed said, noting the unemployment rate, which fell to 6.7 percent in December, had "declined but remained elevated."
In December, the Labor Department said, 74,000 jobs were added to the economy, far fewer than had been expected. But the Fed noted "labor market conditions [were] consistent with growing underlying strength in the broader economy."
The Fed said it will reduce purchases of Treasury securities to $35 billion from $40 billion and drop back to $30 billion spending on mortgage-backed securities, down from $35 billion.
The central bank's key bank-to-bank interest rate known as the federal fund rate will remain at zero to 0.25 percent, the Fed said.