Quantitative Easing

Quantitative easing (QE) refers to the policy of a central bank by which it engages in the large-scale purchase of longer-term debt securities, typically bonds issued by the central government, in an effort to drive down long-term interest rates, thereby stimulating economic activity. In the United States, this policy is implemented by the Federal Reserve (the “Fed”), and the assets purchased are principally long-term U.S. Treasury securities (Treasury notes and bonds) and agency mortgage-backed securities (MBS). This entry focuses primarily on the United States and the Federal Reserve, as the Fed has been most active in implementing this policy, although it has been adopted by central banks in other nations and in the European Monetary Union as well.

QE can be best understood by considering the ...

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