Finance Dictionary
Quantitative Easing
Definition
A monetary policy whereby a central bank buys government bonds or other financial assets in order to inject money into the economy.
Deep Dive
Quantitative Easing (QE) is an unconventional monetary policy employed by central banks to stimulate an economy when standard monetary policy tools, like lowering interest rates, become ineffective, typically because interest rates are already near zero. Under QE, the central bank buys large quantities of government bonds or other financial assets from commercial banks and other financial institutions. This injection of liquidity into the financial system serves to increase the money supply, lower long-term interest rates, and encourage lending and investment.
Examples & Use Cases
- 1The Federal Reserve buying trillions in government bonds during the 2008 financial crisis
- 2The European Central Bank purchasing corporate bonds to stimulate the Eurozone economy
- 3The Bank of Japan's long-term program of asset purchases to combat deflation
Related Terms
Monetary PolicyInterest RatesInflation