Quantitative easing (QE)
When a central bank creates money to buy assets and boost the economy.
QE lowers long-term interest rates and adds money to the financial system. Quantitative tightening is the reverse.
Quantitative easing is what a central bank does when it has already cut its benchmark rate to near zero and needs to loosen policy further. It creates new money and uses it to buy assets, mostly government bonds, which pushes their prices up and long-term yields down, and pumps cash into the financial system. The aim is to make borrowing cheaper and nudge investors toward riskier assets.
Quantitative tightening is the reverse: the central bank lets those bonds mature or sells them, pulling money back out and letting yields rise. QE was used heavily after the 2008 crisis and again in 2020, and it is widely credited with lifting asset prices during those years. Traders watch the direction of the balance sheet, growing or shrinking, as a read on whether liquidity is flowing into markets or draining out.