Quantitative Easing

Quantitative easing is typically put in place when inflation is very low or negative to give the economy a boost. Itโ€™s when a central bank, like the US Federal Reserve, directly purchases government bonds from the market (or other, non-government bonds or stocks). Quantitative easing physically puts cash into the economy (because the bonds are bought with new money that the central bank has created). That cash, in theory, gets put to work doing things โ€“ like buying cars and building factories โ€“ that boost the economy. The result is, theoretically, lower interest rates across the economy โ€“ so itโ€™s cheaper for people and businesses to borrow money, which is also supposed to encourage them to do ย economy-boosting things.

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