Quantitative easing
When a central bank buys bonds to push down long-term interest rates and support the economy.
In plain English
Quantitative easing (QE) is a tool central banks use when cutting interest rates is not enough. The central bank creates new money electronically and uses it to buy government bonds and sometimes other assets.
The reverse, where a central bank shrinks its holdings, is called quantitative tightening (QT).
An everyday example
After the 2008 financial crisis and during the 2020 pandemic, the Bank of England bought hundreds of billions of pounds of gilts to keep borrowing costs low.
Why it matters for investors
QE tends to push bond yields down and can lift the prices of shares and other assets. Critics argue it can also widen wealth gaps and add to inflation over time.
Ask Knightsman for a fresh explanation, or a follow-up question of your own.
Related terms
Education only, not financial advice. Examples are simplified and use illustrative numbers.