Quantitative Easing 2 – QE2

Loading the player...

DEFINITION of 'Quantitative Easing 2 – QE2'

The second round of the Federal Reserve's monetary policy used to stimulate the U.S. economy following the recession that began in 2007/08. QE2 was initiated in the fourth quarter of 2010 in order to jump-start the sluggish economic recovery. The Federal Reserve announced plans to buy $600 billion in long-term Treasuries, in addition to the reinvestment of an additional $250 billion to $300 billion in Treasuries from earlier proceeds from mortgage-backed securities. This, in theory, would push yields on Treasuries and bonds down, creating a surge in investment and consumption expenditures.

BREAKING DOWN 'Quantitative Easing 2 – QE2'

Quantitative easing was intended to stimulate an economy through a central bank's purchase of government bonds or other financial assets. Often, central banks use quantitative easing when interest rates are already zero bound, or at near 0% levels. This type of monetary policy increases the money supply and typically raises the risk of inflation. Quantitative easing is not specific to the U.S., however, and is used in a variety of forms by other major central banks.

RELATED TERMS
  1. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases ...
  2. Monetary Policy

    Monetary policy is the actions of a central bank, currency board ...
  3. 1913 Federal Reserve Act

    The 1913 U.S. legislation that created the current Federal Reserve ...
  4. Treasury Yield

    The return on investment, expressed as a percentage, on the debt ...
  5. Accommodative Monetary Policy

    When a central bank (such as the Federal Reserve) attempts to ...
  6. Treasury General Account

    The general checking account used by the Department of the Treasury. ...
Related Articles
  1. Markets

    Abenomics Vs. Quantitative Easing: Which Works Best?

    Abenomics and QE are versions of extraordinary stimulus measures initiated by the Japanese government and the U.S government, respectively.
  2. Markets

    Quantitative Easing is Now a Fixture, Not a Temporary Patch

    Rather than being a temporary patch, QE is now a fixture in global economic policy, for good or for bad.
  3. Markets

    Does Quantitative Easing Work?

    The US, Japan, and now the EU have embraced quantitative easing. But what works for the economy of one country doesn't necessarily work for another's.
  4. Markets

    How Quantitative Easing Affects the Labor Market

    The Federal Reserve used quantitative easing to aid economic growth. QE has impacted many areas, including the labor market, but are the effects good?
  5. Markets

    How Unconventional Monetary Policy Works

    Unconventional monetary policy, such as quantitative easing, can be used to jump-start economic growth and spur demand.
  6. Markets

    Quantitative Easing

    Learn more about this monetary policy employed by central banks.
  7. Markets

    Why Deflation Is The Fed's Worst Nightmare

    The measures taken by central banks seem to be winning the battle against deflation, but it is too early to tell if they have won the war.
  8. Markets

    Quantitative Easing Report Card in 2016

    Find out why quantitative easing has not worked, despite the best efforts of the Federal Reserve, and how it has fueled the national debt problem.
  9. Markets

    Open Market Operations vs. Quantitative Easing

    How does the Fed's implementation of Quantitative Easing differ from its more conventional open market operations?
  10. Markets

    How The Federal Reserve Affects Mortgage Rates

    The Federal Reserve's actions as it aims to maintain economic stability impact the cost of funds for banks and consequently for mortgage borrowers.
RELATED FAQS
  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. What is QE3 (quantitative easing)?

    "Quantitative easing" refers to steps that the U.S. Federal Reserve takes in attempting to boost the country's lagging economy. ... Read Answer >>
  3. 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 >>
  4. How will the Federal Reserve selling bonds affect the international value of the ...

  5. 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 >>
  6. 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 >>
Hot Definitions
  1. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  2. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  3. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  4. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  5. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  6. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
Trading Center