Washington, July 16 (DPA) The US Federal Reserve said the US economy will climb faster than expected out of its deep recession, but also warned Wednesday that unemployment could top 10 percent before the end of this year.

In its first economic forecast since April, the Fed said it expected the world's largest economy to recover from its 19-month-long recession - albeit slowly - in the second half of 2009.

The US central bank said its outlook had 'improved modestly' since April and the economy 'would expand sluggishly over the remainder of the year.' It pointed to signs that the financial sector, consumer spending and housing sector were all beginning to stabilize.

For the whole of 2009, the Fed forecast a contraction of between 1 percent and 1.5 percent - better than its April prediction of a drop of 1.3-2 percent.

But the US central bank said unemployment would continue to rise over the next few quarters.