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Unconventional Fed tools played key role in post-recession US growth, study says

The Federal Reserve's unconventional monetary policy tools played a significant role in reviving the U.S. economy following the Great Recession, a new study from the National Bureau of Economic Research said, as the central bank faces increased pressure from the Trump administration to do more in supporting growth.

The new NBER working paper said the U.S. economy's post-recession recovery would have been slower if the Fed did not resort to unconventional policy tools, such as forward guidance and asset purchases, which were aimed at influencing long-term rates by changing expectations of future short-term rates.

Researchers said in the study that without those policy tools, the return of the U.S. unemployment rate to an estimated "natural rate" would have been delayed by more than a year.

"The researchers find that an expansion of unconventional policies to aggressively lower long-term interest rates early in a crisis would reduce the peak unemployment rate and also hasten the recovery," NBER researchers Janice Eberly, James Stock and Jonathan Wright wrote in the study.

President Donald Trump has repeatedly called on the Fed this year to make large interest rate cuts and resume its quantitative easing program of purchasing securities to boost the economy.

In July, the Fed announced that it was ending its quantitative tightening program, a move welcomed by Trump.

Fed Chairman Jerome Powell said in September that the central bank could look at unconventional policy tools again in the future instead of cutting rates to near-zero levels. He said the unconventional tools "worked fairly well."