{"id":14337,"date":"2026-05-27T07:41:35","date_gmt":"2026-05-27T07:41:35","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/glossary\/quantitative-easing\/"},"modified":"2026-05-27T07:41:35","modified_gmt":"2026-05-27T07:41:35","slug":"quantitative-easing","status":"publish","type":"glossary","link":"https:\/\/lemonn.co.in\/blog\/glossary\/quantitative-easing\/","title":{"rendered":"Quantitative Easing"},"content":{"rendered":"

Quantitative Easing<\/a> (QE) is a non-conventional monetary policy<\/a> tool where a central bank creates new money to buy financial assets<\/a> (government bonds<\/a>, mortgage-backed securities) from the market. The goal is to inject liquidity<\/a> into the financial system, lower long-term interest rates, and stimulate economic activity when conventional rate cuts are insufficient.<\/p>\n

What Is Quantitative Easing?<\/h2>\n

QE is used when a central bank has already cut interest rates to near zero and needs additional tools to stimulate the economy. By purchasing large quantities of bonds<\/a> from banks and financial institutions, the central bank:<\/p>\n

1. Injects cash into the financial system
\n2. Increases demand for bonds, pushing bond prices up and yield<\/a>s down
\n3. Forces investors toward higher-risk assets (equities, corporate bonds), lowering borrowing costs broadly
\n4. Weakens the currency, potentially boosting exports<\/p>\n

History of QE<\/h2>\n

– **US (Federal Reserve)**: launched QE during the 2008 financial crisis; expanded massively in 2020 during COVID (buying $120 billion per month)
\n– **Europe (ECB)**: extensive QE post-2012 euro crisis
\n– **Japan (Bank of Japan)**: practised QE for decades to fight deflation
\n– **UK (Bank of England)**: used QE in 2009 and again in 2020<\/p>\n

QE and India<\/h2>\n

RBI has not used formal QE but conducted open market operations (OMOs) to manage liquidity. During COVID, RBI announced targeted long-term repo operations (TLTROs) and government securities acquisition programs (G-SAP), which had QE-like effects.<\/p>\n

Risks of QE<\/h2>\n

– **Asset price inflation<\/a>**: cheap money inflates equities, real estate, and other asset prices, widening inequality
\n– **Currency depreciation**: can trigger currency wars
\n– **Inflation risk**: if not unwound properly, excess liquidity can cause consumer price inflation (as seen in 2021-22)
\n– **Zombie companies**: artificially low rates keep inefficient companies alive<\/p>\n

Practical Example<\/h2>\n

During the 2020 COVID crisis, the US Federal Reserve announced unlimited QE, buying $4 trillion in bonds over 18 months. This kept US borrowing costs near zero, supported the stock market, and allowed the government to finance its stimulus at very low rates. However, when QE was unwound in 2022-23, rising interest rates caused bond portfolio<\/a>s to lose value and global asset markets fell sharply.<\/p>\n

Key Takeaways<\/h2>\n

– QE involves a central bank buying financial assets with newly created money to inject liquidity when interest rates are already near zero
\n– Used by the US Fed, ECB, Bank of Japan, and Bank of England during crises
\n– Lowers long-term interest rates, supports asset prices, and weakens the currency
\n– Risks include asset bubbles, inflation, and complications when unwinding the programme
\n– RBI has used QE-adjacent tools (OMOs, TLTROs) but has not labelled them as formal QE<\/p>\n","protected":false},"excerpt":{"rendered":"

Quantitative Easing (QE) is a non-conventional monetary policy tool where a central bank creates new money to buy financial assets (government bonds, mortgage-backed securities) from the market. The goal is to inject liquidity into the financial system, lower long-term interest rates, and stimulate economic activity when conventional rate cuts are insufficient. What Is Quantitative Easing? […]<\/p>\n","protected":false},"author":3,"featured_media":0,"menu_order":0,"template":"","meta":{"_uag_custom_page_level_css":"","footnotes":""},"class_list":["post-14337","glossary","type-glossary","status-publish","hentry"],"blocksy_meta":[],"uagb_featured_image_src":{"full":false,"thumbnail":false,"medium":false,"medium_large":false,"large":false,"1536x1536":false,"2048x2048":false,"web-stories-poster-portrait":false,"web-stories-publisher-logo":false,"web-stories-thumbnail":false},"uagb_author_info":{"display_name":"Team Lemonn","author_link":"https:\/\/lemonn.co.in\/blog\/author\/ashu\/"},"uagb_comment_info":0,"uagb_excerpt":"Quantitative Easing (QE) is a non-conventional monetary policy tool where a central bank creates new money to buy financial assets (government bonds, mortgage-backed securities) from the market. The goal is to inject liquidity into the financial system, lower long-term interest rates, and stimulate economic activity when conventional rate cuts are insufficient. What Is Quantitative Easing?…","_links":{"self":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/14337","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/types\/glossary"}],"author":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/users\/3"}],"version-history":[{"count":0,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/14337\/revisions"}],"wp:attachment":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media?parent=14337"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}