Quantitative Easing (QE)

Quantitative easing is a monetary policy tool that central banks use to help boost economic activity, especially during downturns. In practice, the central bank injects new money into the system by purchasing government bonds or other financial assets. This process increases the overall money supply and pushes up asset prices by creating extra demand. As a result, yields on these securities drop and interest rates throughout the economy tend to fall, encouraging borrowing and investment. While quantitative easing can help support growth in tough times, it also carries the risk of driving up inflation as more money circulates.