Glossary

Quantitative easing

A policy in which a central bank buys government bonds and other securities in large amounts to lower long-term interest rates and support the economy.

Also called: QE, large-scale asset purchases, balance sheet expansion

Quantitative easing (QE) is an unconventional form of monetary policy in which a central bank creates reserves to purchase long-term securities, such as Treasury bonds and mortgage-backed securities, from financial institutions. It is used when the short-term policy rate is already near zero and the bank wants to ease conditions further.

The Federal Reserve launched QE after the 2008 financial crisis, in several rounds through 2014, and again during the COVID-19 pandemic in 2020, expanding its balance sheet from under $1 trillion to nearly $9 trillion. Purchases push up bond prices, lower yields, encourage lending and risk-taking and signal commitment to low rates. The reverse process, quantitative tightening, lets securities run off the balance sheet.

Supporters say QE prevented deeper recessions and deflation. Critics, including many conservatives, argue that it distorts markets, inflates asset prices and benefits those who own assets, adds to the risk of inflation, enables government borrowing and exceeds the central bank's proper role; some predicted high inflation after 2008, which did not materialize, while others link the pandemic QE to the inflation after 2021. Evidence on effectiveness is debated. See monetary policy.

Last reviewed November 8, 2026

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Related terms

Monetary policy The actions of a central bank, such as setting interest rates, to influence money, credit and economic activity. Federal funds rate The interest rate at which banks lend reserve balances to each other overnight, the Federal Reserve's main policy lever. Inflation A sustained increase in the general level of prices, reducing the purchasing power of money. Dual mandate The Federal Reserve's congressionally assigned goals of maximum employment and stable prices (with moderate long-term interest rates). Central bank digital currency A digital form of a country's currency issued directly by the central bank, a proposal opposed by many conservatives on privacy grounds.