Wednesday, September 23, 2015

Quantitative Easing (QE)

  • The central bank buys assets, usually government bonds, with money it has "printed" - or, more accurately, created electronically.
  • It then uses this money to buy bonds from investors such as banks or pension funds. This increases the overall amount of usable funds in the financial system. Making more money available is supposed to encourage financial institutions to lend more to businesses and individuals.
  • Between 2008 and 2015, the US Federal Reserve in total bought bonds worth more than $3.7 trillion.
  • The UK created £375bn ($550bn) of new money in its QE programme between 2009 and 2012.

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