Quantitative easing

• Quantitative easing - Wikipedia, the free encyclopedia

  • Quantitative easing (QE) is an unconventional^[1][2] monetary policy used by central banks to stimulate the national economy when conventional monetary policy has become ineffective. A central bank implements quantitative easing by purchasing financial assets from banks and other private sector businesses with new electronically created money
  • Expansionary monetary policy typically involves targeting a lower short-term market interest rate by the central bank through the buying of short-term government bonds, using a combination of standing lending facilities^[7][8] and open market operations
  • However, when short-term interest rates are either at, or close to, zero, normal monetary policy reaches a limit to its ability to alter longer term interest rates. Quantitative easing may then be used by the monetary authorities to further stimulate the economy, by purchasing assets of longer maturity than only short term government bonds and therefore lowering interest rates further out on the yield curve.^[13][14]
  • Quantitative easing (QE) is a monetary policy used by some central banks to stimulate their economy. The central bank buys government bonds or other financial assets to increase the money supply, thereby increasing the excess reserves of the banking system, and raising the prices of the financial assets bought (which lowers their yield).^[1]
  • Expansionary monetary policy normally involves a lowering of the interest rates by the central bank. However, quantitative easing may be invoked when the normal monetary policy can no longer function, i.e. when interbank interest rates are either at, or close to, zero.^[2][3]