Credit Easing


DEFINITION of 'Credit Easing'

Policy tools used by central banks to make credit more readily available in the event of a financial crisis, such as the one experienced in 2007-2008. In the United States, the policy tools, as described by Federal Reserve Chairman Ben Bernanke in early 2009, include "lending to financial institutions, providing liquidity directly to key credit markets and buying longer-term securities."

The Fed implemented these tools because it needed a way to make interest rates go down and make credit more available to individuals and businesses even though the federal funds rate was already near zero.

BREAKING DOWN 'Credit Easing'

Credit easing entails an expansion and focus on the asset side of the Federal Reserve's balance sheet. This, according to Ben Bernanke, differentiates credit easing from the policy of quantitative easing used by Japan's central bank from 2001 to 2006. Although both methods involve the expansion of the central bank's balance sheet, quantitative easing focused on the liability side of the Bank of Japan's balance sheet.

  1. Monetary Policy

    Monetary policy is the actions of a central bank, currency board ...
  2. Discount Rate

    The interest rate charged to commercial banks and other depository ...
  3. Fed Balance Sheet

    A breakdown of the assets and liabilities held by the Federal ...
  4. Discount Window

    Credit facilities in which financial institutions go to borrow ...
  5. Federal Reserve Board - FRB

    The governing body of the Federal Reserve System. The seven members ...
  6. Federal Reserve System - FRS

    The central bank of the United States. The Fed, as it is commonly ...
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