What it is
Quantitative easing (QE) is an unconventional monetary policy tool used by central banks, like the Federal Reserve, to stimulate the economy when traditional interest rate cuts are no longer effective. It involves the central bank purchasing large-scale assets, primarily government bonds and mortgage-backed securities, from commercial banks. This influx of money into the banking system increases bank reserves, lowers long-term interest rates, and encourages lending and investment by expanding the money supply.
QE impacts financial markets by driving down bond yields and pushing investors into riskier assets like stocks and, at times, cryptocurrencies, searching for higher returns. It can also weaken the domestic currency, making exports cheaper. When the Fed implements QE, it expands its balance sheet significantly. Investors track QE programs closely for their potential to inflate asset prices and stimulate economic activity, often leading to a "risk-on" environment.
Why it matters
QE can boost asset prices and lower borrowing costs, impacting your investment portfolio and the overall economic environment.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice