Quantitative easing (QE)

Quantitative easing (QE) is a monetary policy in which a central bank creates new electronic money in order to buy government bonds or other financial assets to stimulate the economy (i.e., to increase private-sector spending and return inflation to its target). An unconventional form of monetary policy, it is usually used when standard monetary policy has become ineffective at combating a falling money supply. A central bank implements quantitative easing by buying specified amounts of financial assets from commercial banks and other financial institutions, thus raising the prices of those financial assets and lowering their yield, while simultaneously increasing the money supply. This differs from the more usual policy of buying or selling short-term government bonds to keep interbank interest rates at a specified target value.