Economy and interest rates · updated October 21, 2026
What is quantitative easing (QE) and how does it affect the stock market
Quantitative easing (QE) means the central bank buys large amounts of government bonds and other bonds, paying with newly created money. The goal is to lower long-term interest rates and put more money into the economy when the key rate is already close to zero.
How it works
The central bank buys bonds from banks and funds. Bond prices rise, so their yields fall, and long-term loans get cheaper. Those who sold their bonds look for other investments, so money also flows into stocks and real estate. The reverse is called quantitative tightening (QT): the central bank stops reinvesting the money from maturing bonds, or sells them.
Worked example
The Fed used QE after the 2008 crisis and during the pandemic. Its balance sheet, meaning what it holds, grew several times over.
The ECB started a large QE program in 2015 and expanded it in 2020. From 2022, both moved to quantitative tightening.
Worth knowing
The QE years were good for stocks: low rates lifted the price of almost every asset. That is why the end of QE and the move to QT were watched nervously by investors.
When quantitative easing (QE) can fool you
It is not printing money for people directly: the new money goes to banks and investors, not into households' accounts. The effect on inflation is not automatic: after 2008, QE did not bring high inflation; in 2021-2022, combined with heavy government spending and supply shocks, it contributed to it.
Related terms
Questions about quantitative easing (QE)
What is QT?
Quantitative tightening, the opposite of QE: the central bank shrinks its bond holdings, which tends to push long-term rates up.
Which central banks have used QE?
The Bank of Japan first, in the early 2000s, then the Fed, the Bank of England and the ECB after 2008, and many smaller central banks during the pandemic, usually on a much smaller scale.
These explanations are for information only. They are not a recommendation to buy or sell.
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