The head of the Federal Reserve Bank of Atlanta said Tuesday that the central bank's $85 billion per month bond buying could begin to be scaled back this year.

The Federal Reserve has said that it will continue its heavy bond buying, also known as "QE" or "quantitative easing," until unemployment falls to 6.5 percent from its current 7.7 percent. The policy aims to keep interest rates ultra-low and thus, theoretically at least, stimulate borrowing and business activity.

As the size of the Fed's balance sheet balloons, there has been increasing concern about how the central bank can unwind its position without damaging the markets. If the current pace of asset purchases continues to yearend, the Fed will have added about $1 trillion to its balance sheet compared with its scale before last September.

"The decision to curtail asset purchases ought to be forward-looking, and in my judgment, that point could come later this year or early next year without harm to the momentum to the economy," said Dennis Lockhart, in prepared remarks for the Kiwanis Club of Birmingham, Ala.

"For my part, a critical consideration in judging how much longer asset purchases should continue will be confidence in the positive outlook. Confidence that is solidly grounded in improving economic data, accumulated over a sufficient span of time, will help me conclude that the work of the large-scale asset purchase program, as a temporary supplement to conventional interest-rate policy, is complete."