Quantitative Easing (QE)

Quantitative easing is a type of monetary policy designed to stimulate economies or prop up the prices of assets. Quantitative easing is normally employed during recessionary periods. The strategy is implemented when a central bank adds money to an economy, generally by buying securities and bonds from the market. This results in an increase in the money supply. Quantitative easing creates artificial demand for assets, raising their prices. Buying debt instruments lowers their yield, resulting in lower interest rates. This incentivizes riskier investments and economic activity. Quantitative easing will eventually result in inflation for the economy, due to the increased money supply.