Forex glossary
Quantitative Easing (QE)
Quantitative easing (QE) is central bank asset purchasing financed by creating central bank reserves to ease financial conditions. Bond purchases can influence prices, yields and other markets. QE is distinct from a policy-rate cut and does not guarantee a specified increase in lending or currency depreciation.
Illustrative example
How does it work in practice?
In a fictional program, a central bank buys bonds for 1 million currency units and creates reserves for settlement. This is an asset purchase, not an automatic 1 million transfer or immediate loan to households.
A case to work through
An asset exchange
In a fictional operation, a central bank buys 100 units of bonds from an investor through a bank.
- The central bank receives bonds and settlement creates corresponding reserves.
- The seller receives payment; every household does not automatically receive cash.
What follows? Trace the parties and assets exchanged.
Example boundary: This simplifies settlement and calculates no lending expansion.
A useful distinction
Quantitative Easing (QE) / Rate Hike vs Rate Cut
A rate cut changes the policy rate; QE changes the purchased asset stock.
Check your understanding
Identify assets and payment flows in a QE purchase.
Show the answer and explanation
Central-bank asset purchases
Purchasing is part of the QE mechanism.
Rates, exposures and market measures
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Related terms
Sources and documentation
- Quantitative easing – Bank of England
Describes bond purchases using central-bank reserves and separates QE from Bank Rate.
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