Washington - The US Federal Reserve on Wednesday forecast strong growth for the US economy in 2010 and 2011, and central bank head Ben Bernanke said the country's recovery from a deep recession could begin this year with the right combination of government policies.

Fed members dramatically lowered their growth forecasts from October, which came at the early stages of a massive financial crisis that has derailed the world's largest economy. But the figures were nonetheless relatively positive about the prospects in coming years.

The Fed predicted US gross domestic product would shrink between 0.5 per cent and 1.3 per cent this year, but would likely recover to a rate of 2.5 per cent to 3.3 per cent in 2010, according to the minutes of the last Federal Open Market Committee meeting in January.

The central bank further forecast growth of 3.8 per cent to 5 per cent in 2011, which would be above the long-term growth trend for the US.

Bernanke said the possibility of a quick recovery depended greatly on government measures to stabilize the financial sector and revive consumer demand.

"If we can take strong an aggressive action ... I think we can break the back of this thing and begin to see improvements in 2009," Bernanke told reporters at the National Press Club in Washington.

President Barack Obama on Tuesday signed a record 787-billion- dollar economic stimulus package and his administration last week unveiled plans to inject as much as
2 trillion dollars into the financial sector.

On Wednesday he said he would plug 75 billion dollars to stem a record rate of home foreclosures at the heart of the crisis. Some economists have argued even these measures may not be enough.

Bernanke said he was encouraged by the credit market's reaction to the Fed's own unprecendented moves to revive lending in the troubled US economy, including a new programme to bolster loans for everything from credit cards to cars to university tuition.

He said inter-bank lending by financial institutions had opened up somewhat from its worst levels in October after the collapse of Lehman Brothers Holdings, and many banks faced "relatively modest" pressures on their balance sheets at the end of last year.

"We have generally been encouraged by the market responses," Bernanke said. "Our lending to financial institutions has helped to relax the severe liquidity strains experienced by many firms." (dpa)