Quantitative easing (QE)
Large-scale bond buying by a central bank to push down long-term rates.
about $8.9 trillion
Fed balance sheet peak (2022)
March 2015
ECB QE launch
When rates are already at zero
When the policy rate can fall no further, the central bank buys bonds on a large scale, mostly government bonds, with money it creates. These purchases lift bond prices, so lower long-term rates, and push investors towards riskier assets (stocks, corporate credit).
Source: Federal Reserve. The 2022 peak follows the pandemic purchases.
Effects and criticism
QE prevented deflationary spirals in 2009, 2015 and 2020. Critics say it inflated asset prices, hence wealth inequality, and eased public borrowing. The reverse, quantitative tightening (QT), lets the balance sheet shrink by not reinvesting maturing securities.
Common mistakes
- Saying QE “prints banknotes”: it creates bank reserves, not cash handed to the public.
Notitia newsroom · education, not investment advice.