"Quantitative easing" refers to steps that the U.S. Federal Reserve takes in attempting to boost the country's lagging economy. Historically, the Fed's main tool for spurring growth has been lowering short-term rates. However, QE employs expansionary monetary policy, which involves the purchasing of bonds when the interest rate can no longer be lowered.

In September of 2012, the Fed announced its third round of quantitative easing, often abbreviated to "QE3." The bank began buying mortgage-backed securities and Treasury bonds in late 2008 to curb mortgage rates and jumpstart the housing market. While many believe the efforts helped stop the economy's downward slide, anemic growth led to a second round of easing in 2010, followed by QE3 in 2012. This iteration involves the Fed buying an additional $40 billion in mortgage-backed securities each month until it sees improvement in the labor market.

The policy is not without its critics. Some economists note that previous easing measures have lowered rates but done relatively little to increase lending. With the Fed buying securities with money that it has essentially created out of thin air, many also believe it leaves the economy vulnerable to out-of-control inflation once the economy fully recovers.

  1. In what instances is quantitative easing used?

    Discover when, how and why the Federal Reserve and other central banks turn to quantitative easing to stimulate economic ... Read Answer >>
  2. When the Federal Reserve Bank engaged in Quantitative Easing, did it add to M1?

    Learn how quantitative easing affects the money supply and what banks do when quantitative easing is in effect. Find out ... Read Answer >>
  3. What impact does quantitative easing have on banks in the U.S.?

    Read about the economic impacts of quantitative easing on banks in the United States. Find out why some are concerned about ... Read Answer >>
  4. What impact does quantitative easing have on consumers in the U.S.?

    Dig deeper into the Federal Reserve's quantitative easing policies and what potential impacts they may have on American consumers. Read Answer >>
  5. How does quantitative easing in the U.S. affect the stock market?

    Read about the impacts of quantitative easing, or QE, on prices in the stock market, and learn some of the possible implications ... Read Answer >>
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  1. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases ...
  2. Quantitative Easing 2 – QE2

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  3. Monetary Policy

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  4. Tight Monetary Policy

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  5. Accommodative Monetary Policy

    When a central bank (such as the Federal Reserve) attempts to ...
  6. Credit Easing

    Policy tools used by central banks to make credit more readily ...
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