What is "quantitative easing" (QE)?

Quantitative easing is used when standard rate cuts no longer work, typically because rates are already near zero. Instead, the central bank creates new money electronically and buys financial assets, usually government bonds, which increases the money supply, pushes down longer-term interest rates, and aims to encourage lending and spending during economic weakness.

A new income tax and cutting government jobs are fiscal tools controlled by governments through budgets, not central bank tools, and neither involves directly creating money to buy assets, the defining feature of QE.

Quantitative easing was used on a massive scale during the 2008 financial crisis and again during the COVID-19 pandemic, and its long-term effects on asset prices and inflation remain debated among economists.