The U.S. economy is expected to grow up to 3.9 percent this year, said the Fed in the minutes released on Wednesday by the Federal Open Market Committee (FOMC) meeting held in January 25-26.

Fed officials "generally expressed greater confidence that the economic recovery would be sustained and would gradually strengthen over coming quarters," the document noted.

Members of FOMC, the interest rate policy making body of the central bank say in an updated forecast that they think the economy will grow between 3.4 percent and 3.9 percent in 2011. That's an upward revision from their November forecast, which predicted that gross domestic product will grow 3 percent to 3.6 percent.

"Consumer spending, business investment, and net exports increased more strongly at the end of 2010 than expected earlier," the Fed said. "Industrial production also expanded more rapidly."

"Spending by households picked up noticeably in the fourth quarter; business outlays continued to grow at a moderate pace," the Fed noted.

The Fed said that conditions in labor markets continued to improve gradually. And conditions in financial markets improved somewhat further over the intermeeting period.

In addition, fiscal stimulus measures approved by Congress after November were expected to provide further impetus to household and business spending in 2011.

The Fed predicted that the GDP will expand 3.5 percent to 4.4 percent in 2012 and 3.7 percent to 4.6 percent in 2013. Both those forecasts were little changed from November.

The minute showed that participants generally agreed that the downside risks to their forecasts of both economic growth and inflation--as well as the odds of a period of deflation--had diminished.

Fed staff continued to project that increases in core inflation would remain subdued in 2011 and 2012.

During the monetary policy decision making meeting last month, the Fed decided to keep the federal funds rate at historic low level 0 to 1/4 percent target range.