What Is Quantitative Easing?
Quantitative easing, or QE, is when a central bank buys large amounts of bonds to push long-term interest rates down and get money moving in the economy.
How QE works
The central bank creates new money and uses it to buy government bonds and other debt. Buying pushes bond prices up and their yields down. Lower long-term rates make borrowing cheaper for homes and businesses.
When central banks use it
When short-term rates are already near zero and the economy still needs help. The Federal Reserve used QE after the 2008 crisis and again in 2020.
QE and stocks
QE tends to push investors out of low-paying bonds and into stocks, which has often lifted stock prices. The reverse, when a central bank shrinks its bond holdings, is called quantitative tightening, or QT.