Skip to content
Know.itKnow.it
Create an animated lesson
On request

This article is free to read. Creating a lesson uses your daily or stored credits; review the language and settings before starting.

What is quantitative easing?

FinanceLesson on requestFree to read

Quick answer

Quantitative easing (QE) is a tool central banks use to stimulate a weak economy. They create new money to buy financial assets like government bonds, which lowers interest rates and pumps money into the system to encourage lending and spending.

Key things to understand

  1. It's a central bank tool to boost a struggling economy.
  2. The bank creates new money to buy bonds and assets.
  3. This lowers interest rates and adds money to the system.
  4. It aims to encourage lending, spending, and investment.

People also ask

What is quantitative easing?
When a central bank creates money to buy assets like bonds, lowering rates and stimulating the economy.
Why do central banks use quantitative easing?
To boost a weak economy when interest rates are already near zero and need further stimulus.
Does quantitative easing cause inflation?
It can contribute to inflation by increasing the money supply, though effects depend on the wider economy.