What even is Quantitative Easing (QE)?

  • An unconventional monetary policy used by central banks to boost the economy when standard monetary easing has become ineffective.
  • Standard monetary easing = buying SHORT-TERM government bonds from the market in order to push/keep short-term interest rates at a specified target value (no longer works when short-term rates close to zero).
  • QE = buying specified amounts of MEDIUM-TERM AND LONG-TERM government bonds from the market (results in higher price of these bonds and therefore a lower interest rate).

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