Fed Chairman Ben Bernanke. (Photo: AP)

While an improving U.S. job market propelled most Federal Reserve officials to vote last month for the Fed to scale back its bond-buying program, the officials also saw diminishing economic benefits from the central bank’s bond buying program and voiced concern about risks to financial stability, according to the minutes from the Federal Open Market Committee’s December meeting, released Wednesday.

“Most members agreed that the cumulative improvement in labor market conditions and the likelihood that the improvement would be sustained indicated that the committee could appropriately begin to slow the pace of its asset purchases at this meeting,” according to minutes of the Dec. 17-18 meeting.

The minutes went on to say that “a majority of participants judged that the marginal efficacy of purchases was likely declining.” Participants also were “concerned about the marginal cost of additional asset purchases arising from risks to financial stability” citing the potential for “excessive risk-taking in the financial sector.”

The Federal Open Market Committee announced after its December meeting that it would start reining in its quantitative easing program by instituting a “modest” $10 billion reduction in its monthly bond-buying program to $75 billion per month.

Beginning in January, the FOMC said, it will add to its holdings of agency mortgage-backed securities at a pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per month.

At his last press conference before he steps down as Federal Reserve Board chairman, Ben Bernanke said after the December meeting that further tapering will “be data dependent.” However, he said he anticipated that the Fed would “probably do a measured reduction” at each meeting in 2014.

“If the economy slows or we are disappointed we could skip a meeting or two, but if things pick up we could go a bit faster,” he said. “I anticipate similar moderate steps through most of 2014.”

Janet Yellen, who was confirmed by the Senate to be the next Fed chief, officially starts on Feb. 1, when Bernanke’s term ends.

The FOMC’s first meeting of 2014 will be held Jan. 28 and 29, but a summary of economic projections and a press conference by Yellen won’t come until the meeting on March 19.

Bernanke said in a speech Friday that the encouraging news for the Fed in the New Year is that the “headwinds” the Fed faced during his term “may now be abating.”

Near-term fiscal policy at the federal level remains restrictive, Bernanke said, “but the degree of restraint on economic growth seems likely to lessen somewhat in 2014 and even more so in 2015; meanwhile, the budgetary situations of state and local governments have improved, reducing the need for further sharp cuts. The aftereffects of the housing bust also appear to have waned.”

Check out House Committee Promises ‘Vigorous’ Oversight of Yellen’s Fed on ThinkAdvisor.