Quantitative Easing 2 – QE2

AAA

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.

INVESTOPEDIA EXPLAINS '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.

VIDEO

RELATED TERMS
  1. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases ...
  2. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  3. 1913 Federal Reserve Act

    The 1913 U.S. legislation that created the current Federal Reserve ...
  4. Federal Reserve Board - FRB

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

    The central bank of the United States. The Fed, as it is commonly ...
  6. Wall Street Journal Prime Rate

    An interest rate that large banks in the United States charge ...
Related Articles
  1. Economics

    The Taylor Rule: An Economic Model For Monetary Policy

    This interest rate forecasting model has helped central banks around the world adjust their rates to balance out inflation.
  2. Investing News

    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?
  3. Economics

    Can state and local governments in the US run fiscal deficits?

    Discover why most state and local governments do not – or cannot – run fiscal deficits in the same manner as the U.S. federal government.
  4. Active Trading Fundamentals

    How do central bank decisions affect volatility?

    Using an aggregate, macroeconomic perspective, take a look at how some of the ways central bank decisions can impact market volatility.
  5. Fundamental Analysis

    What does the term 'invisible hand' refer to in the economy?

    Discover and understand the concept of the "invisible hand" as explained by Adam Smith, considered the founder of modern economic theory.
  6. Fundamental Analysis

    At what level is the current account deficit considered excessive, in terms of percent?

    Take a deeper look at the variables that impact current account deficits, and learn why not all types of deficits have equal impacts on a nation's economy.
  7. Personal Finance

    How is the consumer price index (CPI) used in market escalation contracts?

    Understand the purpose of market escalation contracts and learn how the consumer price index (CPI) is often used to make periodic contract price adjustments.
  8. Economics

    What's the Federal Funds Rate?

    The federal funds rate is the interest rate banks charge each other for overnight loans to meet their reserve requirements.
  9. Economics

    The Economic Impact of Better US-Cuba Relations

    We examine what the normalization of relations between the US and Cuba will mean for the two countries' economies.
  10. Economics

    How US & European Union Sanctions Are Crippling Russia

    Economic sanctions imposed by the US and EU on Russia are having a crippling effect; the Russian economy shrank for the first time in five years.

You May Also Like

Hot Definitions
  1. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  2. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  6. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
Trading Center