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. Federal Reserve Board - FRB

    The governing body of the Federal Reserve System. The seven members ...
  5. Ben Bernanke

    The chairman of the board of governors of the U.S. Federal Reserve. ...
  6. Discount Window

    Credit facilities in which financial institutions go to borrow ...
Related Articles
  1. Economics

    Ben Bernanke: Background And Philosophy

    Get some insight into the man at the forefront of key U.S economic decisions.
  2. Economics

    How Much Influence Does The Fed Have?

    Find out how current financial policies may affect your portfolio's future returns.
  3. Personal Finance

    How The U.S. Government Formulates Monetary Policy

    Learn about the tools the Fed uses to influence interest rates and general economic conditions.
  4. Personal Finance

    How The Federal Reserve Manages Money Supply

    Find out how the Fed manages bank reserves and this contributes to a stable economy.
  5. Personal Finance

    How The Federal Reserve Was Formed

    Find out how this institution has stabilized the U.S. economy during economic downturn.
  6. Economics

    When The Federal Reserve Intervenes (And Why)

    The Federal Reserve doesn't interfere with the economy every time it flounders. Find out more here.
  7. Bonds & Fixed Income

    The Fed's New Tools For Manipulating The Economy

    The economy can be volatile when left to its own devices. Find out how the Fed smoothes things out.
  8. Economics

    Why the Euro Failed to Become the World's Reserve Currency

    Examine the current state of the U.S. dollar as the world's reserve currency; learn the major reasons why the euro has failed to replace it in that capacity.
  9. Investing Basics

    How to Use Boring CDs to Diversify

    Markets are volatile and are in for more punishment. CDs can help investors earn some interest while they're waiting out the storm.
  10. Investing

    Breaking Down the Federal Reserve's Dual Mandate

    The Fed has been tasked with a dual mandate by Congress to achieve monetary stability. We explain what the dual mandate is and what it means.
  1. Who decides to print money in Russia?

    The Central Bank of the Russian Federation (CBRF), like its peers in most countries, is the governmental entity responsible ... Read Full Answer >>
  2. Who decides to print money in Canada?

    In Canada, new money comes from two places: the Bank of Canada (BOC) and chartered banks such as the Toronto Dominion Bank ... Read Full Answer >>
  3. Who decides when to print money in India?

    The Reserve Bank of India, or RBI, manages currency in India. The bank's additional responsibilities include regulating the ... Read Full Answer >>
  4. Is Japan an emerging market economy?

    Japan is not an emerging market economy. Emerging market economies are characterized by low per capita incomes, poor infrastructure ... Read Full Answer >>
  5. How is the Federal Reserve audited?

    Contrary to conventional wisdom, the Federal Reserve is extensively audited. Politicians on the left and right of a populist ... Read Full Answer >>
  6. Who decides when to print money in the US?

    The U.S. Treasury decides to print money in the United States as it owns and operates printing presses. However, the Federal ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  2. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  3. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  4. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  5. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  6. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!