What is Quantitative Easing?
Quantitative easing is the purchase by a central bank of financial assets through creation of central bank reserves. As a result, the price of the purchased assets (which can include government securities or private assets) rises and the yield on the assets falls. The expansion of reserves available to commercial banks also encourages them to increase the supply of credit to households and businesses. In economic terminology, quantitative easing uses ‘unsterilized’ funding; in other words, the reserves of the central bank are increased to finance asset purchases.
