Quantitative easing facts for kids

Quantitative easing (QE) is something a central bank can do to help the economy. It is done by buying bonds or other assets. With this, the interest rate will decrease and the rate of inflation will go up. It is usually used when inflation is very low or negative. It is used when normal expansionary monetary policy doesn't work.

Quantitative easing can help bring an economy out of recession. The International Monetary Fund, the U.S. Federal Reserve, and other economists say that quantitative easing after the 2007-2008 financial crisis helped stop some problems from getting worse.

QE is used by the United States, the United Kingdom and Japan. It has helped to cause a bull market on stock exchanges.

History

The US Federal Reserve used policies similar to quantitative easing during the Great Depression of the 1930s.

Japan before 2007

A policy called "quantitative easing" (量的金融緩和, ryōteki kin'yū kanwa) was first used by the Bank of Japan (BOJ) to stop domestic deflation in the early 2000s. The BOJ had kept short-term interest rates at close to zero since 1999. The Bank of Japan had for many years, and as late as February 2001, said that "quantitative easing ... is not effective". They did not like to use it for monetary policy.

The Bank of Japan says that they started quantitative easing on 19 March 2001.

Images for kids

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  Federal Reserve holdings of treasury notes (blue) and mortgage-backed securities (red)

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  Increase in US Federal Reserve assets in response to COVID-19 pandemic

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  Immediate and delayed effects of quantitative easing

See also

In Spanish: Expansión cuantitativa para niños