Quantitative easing

Quantitative easing is a monetary policy in which a central bank buys assets, usually government bonds, to lower longer-term interest rates and ease financial conditions.

Central bank balance sheet: A statement of a central bank’s assets, liabilities, and capital. Bond purchases expand assets and typically create reserve balances as liabilities.
Federal Reserve: The central bank of the United States. Its large-scale asset purchases became a prominent model for QE after 2008.
Open market operation: A central-bank purchase or sale of securities used to implement monetary policy. QE extends familiar securities purchases through their scale, duration, or policy purpose.
Long-term interest rate: The yield or borrowing cost associated with debt lasting for an extended period. Lower long-term rates are a central intended effect of central-bank purchases.
Zero lower bound: A perceived floor near zero on nominal interest rates, below which conventional rate cuts may become difficult or costly. QE gained prominence when policy rates approached levels that left little room for further cuts.
Central bank reserves: Deposits that commercial banks hold at a central bank. Purchases from banks or their customers increase reserve balances in the banking system.
European Central Bank: The central bank responsible for monetary policy in the euro area. Its asset-purchase programs addressed weak inflation and financial fragmentation across member states.
Policy interest rate: A short-term interest rate set or targeted by a central bank to guide monetary conditions. Rate cuts directly adjust the short end of the yield curve; QE targets longer-term conditions.
Inflation expectations: Expectations about the future rate of change in prices. QE can support expected inflation when demand and price growth are persistently weak.
Japanese asset price bubble: The late-1980s surge and subsequent collapse in Japanese stock and real-estate prices. Japan’s prolonged stagnation and deflation shaped early experiments with large-scale monetary easing.

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