What Is Quantitative Easing (QE)?
Quantitative Easing is the name given to government policy to increase the money supply by injecting liquidity into the economy. This is done by buying government assets back from the market.
The reason behind using quantitative easing is that it will increase the capital within the financial sector and therefore increase the amount which banks lend to consumers and small businesses, in an effort to promote economic growth. Quantitative easing is usually only done when interest rates are already extremely low and there are no other measures which can be taken.
Unfortunately, there is very little evidence to show that QE helps at all; in fact the evidence is to the contrary. The negative impact of QE is that an increase in the money supply without a corresponding increase in demand for money is likely to push up inflation.
Related Terms
