noun
Quantitative Easing (QE) is a non-traditional monetary policy tool used by central banks to stimulate the economy when standard interest rate policies become ineffective, especially during periods of low or near-zero interest rates.
In QE, the central bank purchases long-term securities such as government bonds and mortgage-backed assets from the open market. This injects liquidity directly into the financial system, aiming to lower interest rates, encourage lending, and promote investment and consumer spending.
The phrase “money printing” is often used to describe QE because, although no physical currency is printed, new digital money is effectively created and used to purchase financial assets. This expands the central bank’s balance sheet and increases the money supply, often leading to inflationary concerns over time.
QE plays a critical role in economic cycles: it is typically introduced during recessions or financial crises to prop up the economy. As the new money flows into financial markets, asset prices—including stocks, real estate, and cryptocurrencies—often rise, creating what is referred to as a “liquidity-driven bull market.”
The money created through QE is not given directly to the public. Instead, it is funneled through the financial system—primarily to commercial banks, large institutional investors, and market makers. These entities receive liquidity in exchange for the bonds they sell to the central bank. The end result is a concentration of capital in financial markets, driving up asset prices as this money chases returns.
This is why price action in stocks and crypto can surge before, during, and after economic downturns. Liquidity injections front-run real economic recovery, and markets often anticipate further easing—creating speculative rallies even as the broader economy remains weak.