A form of monetary policy that is sometimes used to stimulate the economy when interest rates have already been reduced close to zero; it is regarded as a policy of last resort when there is a serious risk of deflation. Essentially, the central bank creates new money electronically by expanding its balance sheet and uses this to buy government bonds from financial institutions. The aim is to boost the amount of money in circulation and to increase the willingness of banks to lend. QE, which was introduced in the UK from March 2009, is regarded as a high-risk strategy because of the risk of hyperinflation. Economists disagree as to how far it differs from the older and discredited policy of simply printing extra money.
Subjects: Financial Institutions and Services — Accounting.