By Alister Bull and Pedro da Costa
OMAHA, Neb./GRENVILLE, South Carolina (Reuters) - One of the Federal Reserve's most hawkish officials urged the central bank on Friday to curb bond buying to $70 billion a month when it meets later this month, while a noted policy dove agreed that the Fed could start to taper later this year.
Expectations for a modest cut in the U.S. central bank's monthly bond purchases at the upcoming meeting were mostly intact after a mixed August payroll report, released earlier on Friday.
Most economists at U.S. primary dealers expect the Fed to ease back on stimulus after the September 17-18 discussions, according to a Reuters poll which showed such bets had firmed in the last month.
Esther George, the Kansas City Fed's consistently hawkish leader, said she favored trimming bond purchases from their current $85 billion a month when policymakers next meet.
But Chicago Fed President Charles Evans, like George a voter on the policymaking committee this year, stressed a move to taper was not a done deal. He would weigh other evidence about the durability of the economic recovery, although he said he could be swayed toward a pullback.
"This is a period where it's even more important to go into an FOMC meeting with an open mind," said Evans, referring to the central bank's policy-setting Federal Open Market Committee.
"There's been cumulative progress on the economy. I can be persuaded that there has been enough improvement," he told an audience in Greenville, South Carolina.
Financial markets are focused on the policy meeting on September 17-18 for a small start to a tapering in the purchases. The Fed expects to halt these by mid-2014, when it forecasts that the U.S. unemployment rate will be around 7 percent.
Evans, a monetary policy dove who has tended to downplay inflation concerns, said it was disappointing to see labor force participation fall again, a sign that the jobless rate could be going down because of discouragement rather than hiring.
"The U.S. economy has a long way to go to return to healthy normalcy," Evans said, adding the economy is still around 5 million jobs short of where it should be at this point.
In fact, data released by the U.S. government earlier on Friday showed the unemployment rate creeping toward that target, with a decline to 7.3 percent in August, a 4-1/2 year low.
However, firms only added 169,000 new jobs last month, compared to a Reuters forecast for a 180,000 advance in the crucial monthly non-farm payroll report, and economists said the jobless rate drop was for the wrong reasons.