Quantitative Easing
Quantitative easing is large-scale central-bank asset purchases that expand reserves — a duration and liquidity operation when the policy rate is pinned.
Definition
The central bank buys bonds (or other assets) and credits reserves. It pulls duration from the market and floods the banking system with reserves. Transmission is through prices, portfolio balance, and signaling — debated in size.
Why it matters
It is the post-ZLB tool. Who holds the duration (Fed vs private) changes term premium and, sometimes, risk assets.
Case
2020 QE: the Fed bought Treasuries and MBS at scale. Spreads tightened and the sheet exploded. 2022 QT tried to walk it back without a 2019-style reserve scare.
How to read it
Pace, which assets, and reserve regime (scarce vs ample). QE is not ‘printing CPI’ by identity; it is a stock-and-flow in the bond market.