Quantitative easing

Understand the idea

Asset purchases can influence longer-term yields and liquidity. Their effects depend on expectations and the broader economy. They are not the same as government spending or a guaranteed increase in lending.

An example

A central bank buys government bonds from market participants.

Connected ideas

• Possible economic mechanismBond yields

  Purchases may influence bond prices and yields.

• Possible economic mechanismLiquidity

  Purchases change the banking system’s holdings of reserves.

In the news

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