quantitative easing

• What is quantitative easing (QE)?

  A non-traditional monetary policy tool
• When is quantitative easing typically used?

  During very low or near-zero interest rates
• What are the main steps in how quantitative easing works?

  1. Asset purchases by the central bank
  2. Increase in money supply
  3. Lowering yields on bonds
  4. Stimulating spending through increased lending
  5. Boosting confidence and asset prices
• What types of assets does the central bank primarily purchase in QE?

  Government bonds and corporate bonds
• What is the effect of asset purchases on the money supply?

  It increases the money supply
• How does QE aim to affect long-term interest rates?

  By lowering them through increased money supply
• What happens to bond prices when demand increases due to QE?

  Bond prices rise, yields fall
• What is the impact of lower yields on borrowing costs?

  It reduces borrowing costs for consumers
• How does increased liquidity in the banking system affect lending?

  It encourages banks to lend more
• What is one effect of increased lending on the economy?

  It can spur spending on goods and services
• How can QE boost consumer and business confidence?

  By raising asset prices and returns
• What are the main goals of quantitative easing?

  • Combat deflation
  • Stimulate economic growth
  • Reduce unemployment
• What is a potential risk of excessive liquidity from QE?

  It may lead to inflation
• What can prolonged QE potentially inflate?

  Asset prices, leading to bubbles
• What is a consequence of overreliance on QE?

  It could reduce its effectiveness over time
• What are the long-term implications of quantitative easing on the economy?

  • Requires careful consideration of financial stability
  • Potential for inflation and asset bubbles
  • Impact on economic health and growth sustainability