What is Quantitative Easing?
Quantitative Easing (QE)
Forex Trading Glossary
Quick Answer: Quantitative easing is a central bank program that creates money to buy bonds and other assets when policy rates are near zero. QE lowers yields, expands the money supply, and often weakens the currency while supporting risk sentiment.
What is Quantitative Easing (QE)?
Quantitative Easing is an unconventional monetary policy where a central bank purchases government bonds or financial assets to inject money into the economy and encourage lending. Essentially "printing money" to buy assets, QE is used to stimulate growth when interest rates are already at or near zero.
How QE Works
- Asset purchases: Central bank buys bonds from financial institutions
- Increased money supply: Banks have more cash to lend
- Lower yields: Bond buying pushes yields down
- Currency impact: Generally weakens currency (inflation concerns)
QE vs Tapering
- QE expansion: Bearish for currency (money printing)
- Tapering: Reducing QE, bullish for currency (tightening)
- QE end: Shift toward normal policy, currency strength
Related Terms
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