What Is Quantitative Easing?
Quantitative easing (QE) is a monetary policy tool used by central banks to stimulate economic activity when traditional interest rate adjustments are not enough. Under QE, a central bank buys financial assets, such as government bonds, from banks and financial institutions. This injects money directly into the financial system, increasing banks’ reserves, lowering long-term interest rates, and encouraging lending and investment.
By purchasing large amounts of assets, the central bank expands the money supply, making borrowing cheaper for businesses and consumers. The goal is to boost spending, support economic growth, and raise inflation toward target levels during periods of weak demand.
QE can influence asset prices and financial conditions, but it also carries risks if used excessively, such as inflationary pressure or asset bubbles. Because it increases liquidity in markets, QE has been used in major economies during financial downturns to support recovery and confidence.
