Quantitative Easing

Quantitative easing means a central bank buys financial assets to add money and liquidity to the financial system. In simple terms, quantitative easing is when a central bank tries to support the economy by buying bonds and making financial conditions easier. Quantitative easing is important because it can lower long-term interest rates, support asset prices, encourage lending, and improve market confidence during weak economic periods. For example, after a financial crisis, a central bank may buy government bonds to inject liquidity into the market. Quantitative easing is not the same as cutting short-term interest rates. It usually works through asset purchases and the central bank’s balance sheet.