Quantitative easing (QE) is large-scale asset purchasing by a central bank, usually when the policy rate is near its effective lower bound. The central bank buys government bonds or other securities and pays by crediting the seller's bank with reserves.

QE changes the size and composition of the central bank's balance sheet. It can lower longer-term yields, ease financial conditions, signal policy commitment, and restore market functioning. Its effects are indirect and depend on the state of the economy.[1]

QE is not the same as directly financing government spending or handing cash to households. It creates reserves in exchange for assets.[2]

Sources

  1. Board of Governors of the Federal Reserve System. How Does Monetary Policy Work?. Federal Reserve. 2026. View source Accessed Nov 11, 2026.
  2. Keister, Todd; McAndrews, James. Why Are Banks Holding So Many Excess Reserves?. Federal Reserve Bank of New York, Current Issues in Economics and Finance. 2009. View source Accessed Nov 11, 2026.