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Fed minutes: Most participants saw taper as appropriate, cautious first step

Federal Reserve officials approved a modest decrease in the monthly asset purchasing program in December as a cautious first step towards policy normalization, according to minutes from the key December meeting.

Details from the meeting showed also that the Fed is pursuing a course contingent on economic progress and not set in stone.

The Open Markets Committee voted to cut the purchases from $85 billion to $75 billion a month, but gave no indication that a future course is preset.

"Many members judged that the committee should proceed cautiously in taking its first action to reduce the pace of asset purchases and should indicate that further reductions would be undertaken in measured steps," the minutes said.

"Members also stressed the need to underscore that the pace of asset purchases was not on a preset course and would remain contingent on the committee's outlook for the labor market and inflation as well as its assessment of the efficacy and costs of purchases."

The U.S. central bank has been buoyed toward increasingly positive news in the employment market, with ADP and Moody's Analytics reporting Wednesday that private payrolls increased by a relatively robust 238,000 in December.

Federal Reserve Board Chairman Ben Bernanke
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Federal Reserve Board Chairman Ben Bernanke

Chairman Ben Bernanke had indicated that a 7.0 percent unemployment rate—where the figure stands now—would serve as a rough benchmark for reducing the pace of asset purchases, also known as quantitative easing.

Though the initial market reaction to the December reduction—"tapering," in market vernacular—was positive, the 2014 market has been sluggish. Stocks traded lower heading into the 2 pm ET minutes release and remained there afterwards, while the 10-year Treasury note broke the 3 percent barrier.

The minutes reflected an effort to assuage market angst over the Fed taking away the proverbial punch bowl that has goosed the stock market more than 160 percent since the March 2009 lows and held interest rates near historically low levels.

"While deciding to modestly reduce its pace of purchases, the committee emphasized that its holdings of longer-term securities were sizable and would still be increasing, which would promote a stronger economic recovery by maintaining downward pressure on longer-term interest rates, supporting mortgage markets, and helping to make broad er financial conditions more accommodative," the minutes said.

Some members, though, said they preferred the Fed cut back on purchases even more than the $10 billion reduction "and future reductions that would bring the program to a close relatively quickly."

FOMC member Eric Rosengren dissented from the vote to taper, calling it "premature."

The Federal Reserve minutes come from the Dec. 17-18 meeting.

(Get the full minutes here.)

—By CNBC's Jeff Cox. Follow him on Twitter @JeffCoxCNBCcom.

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