Quantitative Easing
Central bank purchases of long-dated assets to push down long rates.
What is Quantitative Easing?
When short rates are already near zero, the central bank buys Treasuries and mortgage-backed securities to lower long-term yields and expand the money supply. Quantitative tightening is the reverse - letting the balance sheet run off.
Quantitative Easing: a worked example
The Fed's balance sheet grew from under $1T in 2007 to roughly $9T by 2022.
More terms in Macro & Markets
Inflation
A general rise in prices that erodes purchasing power.
Real vs. Nominal Return
Return after inflation versus the headline number.
Federal Funds Rate
The overnight interbank lending rate targeted by the Fed.
Monetary vs. Fiscal Policy
Central bank rate and money supply tools versus government tax and spending.
Yield Curve
A plot of Treasury yields across maturities.
Yield Curve Inversion
Short-term yields exceeding long-term yields - a recession signal.
Recession
A significant, broad, sustained decline in economic activity.
Gross Domestic Product (GDP)
The total value of goods and services produced in an economy.