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QE
(Quantitative Easing)
QE (Quantitative Easing) is a Fed policy where central banks buy long-term securities (e.g., Treasuries, MBS) to inject liquidity, lowering long-term interest rates during crises. Deployed post-2008 ($4.5T) and during COVID ($3.3T).
Expands the Fed's balance sheet (assets purchased) and boosts asset prices (S&P500 rose 400% during 2009-2021 QE). Critics warn QE fuels inequality (benefits asset owners) and zombie firms. The ECB and BoJ also used QE, with Japan's reaching 135% of GDP. "QT" (quantitative tightening) reverses QE by selling assets—the Fed's 2022 QT aimed to curb inflation but risked market instability.
Expands the Fed's balance sheet (assets purchased) and boosts asset prices (S&P500 rose 400% during 2009-2021 QE). Critics warn QE fuels inequality (benefits asset owners) and zombie firms. The ECB and BoJ also used QE, with Japan's reaching 135% of GDP. "QT" (quantitative tightening) reverses QE by selling assets—the Fed's 2022 QT aimed to curb inflation but risked market instability.