Quantitative Easing (QE)
What is Quantitative Easing?
Large-scale bond purchases by a central bank to lower long-term interest rates.
Understanding Quantitative Easing
When short-term interest rates are already near zero, a central bank can still ease policy by buying government bonds and other securities in large amounts. This pushes up bond prices, lowers long-term yields, and adds reserves to the banking system.
The Federal Reserve used QE after the 2008 financial crisis and again in 2020. Shrinking those holdings later is called quantitative tightening (QT).