Quantitative Easing.
In plain English
Quantitative easing, often shortened to QE, is a tool central banks use when cutting interest rates to near zero is not enough to support the economy. The central bank creates new money and uses it to buy large amounts of bonds, usually government bonds and sometimes mortgage bonds. This raises bond prices, pushes longer-term interest rates down, and adds money to the financial system, with the aim of encouraging borrowing and spending. The reverse, where the central bank lets those holdings shrink, is called quantitative tightening.
01Why it matters
QE can lower the interest rates you pay on a mortgage or loan and lift asset prices like stocks, but unwinding it can push borrowing costs back up.
02The math, step by step
During severe downturns, the Federal Reserve has bought large quantities of bonds through QE programs to hold down long-term rates and keep credit flowing. Lower mortgage rates during those periods were partly a result.
03What this is NOT
Quantitative easing is not the government mailing people cash. The central bank buys financial assets like bonds to lower rates and add liquidity. The money flows through the financial system, not directly into people's mailboxes.
04Receipts
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