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. Investing

    Quantitative Easing: Does It Work?

    This controversial monetary policy has been used by some of the world's most powerful economies. But does it work?
  2. Investing

    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.
  3. Insights

    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.
  4. Investing

    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. Investing

    The Treasury And The Federal Reserve

    Find out how these two agencies create policies to stimulate the economy in tough economic times.
  6. Insights

    Not Crazy: Unconventional Monetary Policy

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

    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. Personal Finance

    How the Federal Reserve Affects Your Mortgage

    The Federal Reserve can impact the cost of funds for banks and consequently for mortgage borrowers when maintaining economic stability.
  9. Insights

    How Much Influence Does The Fed Have?

    Find out how current financial policies may affect your portfolio's future returns.
  10. Trading

    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.
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. 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 >>
  5. 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. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  2. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  3. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  4. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  5. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  6. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
Trading Center