Recent U.S. economic data is looking better and a solid jobs report for November would increase the likelihood that the Federal Reserve would start to scale back bond buying at its meeting next month, a senior Fed official said on Wednesday.
"It is definitely on the table, but it is going to depend on the data,'' James Bullard, president of the St. Louis Federal Reserve Bank, told Bloomberg television. "A strong jobs report, I think, would increase the probability some for a December taper.''
Bullard is a voting member of the Fed's policy-setting committee this year.
The central bank at its October policy meeting voted to keep buying bonds at an $85 billion monthly pace, delaying a decision to start scaling back the program until it saw more evidence of a durable recovery that could sustain job creation.
(Read more: Was Jack Welch right? Jobs numbers under fire)
The Fed had stunned markets in September when it opted to keep buying bonds at the same pace, after allowing expectations to harden over the summer that it was getting set to taper.
Yields on longer-term bonds, which had risen sharply on expectations of tapering, snapped back when the Fed opted to stick with the $85 billion pace.
Bullard said that when the Fed does eventually decide to start reducing bond purchases, markets would be better prepared.
"If we taper because we see a stronger economy, I think the markets will swallow that without a problem,'' he said.
The U.S. central bank has held interest rates near zero since late 2008 and quadrupled its balance sheet through three huge bond-buying campaigns aimed at spurring growth and hiring by holding down long-term borrowing costs.
(Read more: Fickle Fed: Taper could arrive in 'coming months')
Bullard said October's employment report, which showed the creation of 204,000 new jobs, and an upward revision in the number of jobs created in the previous months had raised average job creation.
"Now we're looking at 200,000 jobs per month over the last three months. That's a lot different picture than we were looking at before the jobs report,'' he said. "This cumulative progress argument is the most powerful argument for tapering.''
The Fed spelled out when it launched the latest round of bond buying in September 2012 that it would continue until policymakers saw a substantial improvement in the outlook for the labor market. Bullard argued this was now the case.
"I think we have met that test. And the only question is, can we sustain that going forward and what about inflation?'' Bullard said.
Bullard had dissented in June against the Fed's decision to talk about tapering bond buying because he was concerned that inflation was too low.
The U.S. consumer price index for October rose by 1.0 percent on a yearly basis, data released earlier on Wednesday showed. The Fed has a 2 percent medium-term inflation goal. Its preferred gauge of price pressures, the PCE price index, is reporting even more muted levels of inflation.
While an improving economy has policymakers thinking about paring back some of their monetary stimulus, a turn for the worse would prompt discussion about expanding the central bank's toolkit for fostering stronger growth.
(Read more: Good times! Consumers pry open wallets in October)
Bullard said one option would be for the Fed to pay a lower rate of return on the money banks park at the institution, and perhaps even a negative rate of return.
"The committee has debated this repeatedly over the last four or five years,'' he said, saying the option was not currently on the table.
"If the economy took a downturn then I think we would look at it a lot harder,'' he said.
Making banks pay to deposit cash with the central bank overnight is policy option is currently under consideration at the European Central Bank, news agency Bloomberg said on Wednesday, citing unnamed sources.