The Federal Reserve could expand its already vast efforts to restore normal functioning in financial markets, and its actions ultimately will help restore global economic growth, a top Fed policy-maker said on Tuesday.

The Federal Open Market Committee's policy decisions have been calibrated to deal with the 'adverse feedback loop' between disruptions to financial market stability and the real economy, Charles Evans, Chicago Fed president, said in remarks prepared for a speech at the Czech National Bank in Prague.

They will also have a stabilizing effect on markets around the world and will therefore eventually stimulate worldwide economic recovery.

Evans is a voting member of the FOMC in 2009.

The global financial system is suffering the worst crisis in 70 years, and the Fed, for its part, has needed to do more even after slashing its target for the federal funds rate to essentially zero in December, Evans said

Betting in financial markets shows dealers suspect the Fed could keep rates at next to zero through year-end.

Financial distress, the weak outlook for growth and the prospects for unusually low inflation call for more policy accommodation, he said.

Ultimately the FOMC will resume its focus on traditional monetary policy, Evans said -- echoing a joint statement made on Monday by the Fed and the U.S. Treasury.

For now, as conditions warrant, we will be expanding existing programs, including the Term Asset-Based Securities Lending Facility, or TALF, now under way, and the FOMC's decision last week to buy up to $300 billion in longer-term Treasury debt.

When economic activity recovers and financial conditions normalize, the use of non-traditional policy tools and the size of the Fed's balance sheet will be reduced, he said.

Some of the wind-down process will happen naturally, while other facilities will likely be dismantled as the economy improves, Evans said.

For example, loans being made under TALF, which is aimed at restoring lending at the consumer level, are attractive during current market conditions, but are more costly than those that prevail during more normal times, he said.

Since TALF was announced conditions in the asset-backed securities market have already improved, Evans said, adding that the program, with its three-year loans, can impact longer-run interest rates.

Still, the market must be prepared for the eventual dismantling of the facilities that have been put in place during the market turmoil, he added.

(Editing by Leslie Adler)