Quantitative Easing (QE) is a monetary policy used by central banks to stimulate economic growth during periods of slow economic activity or recession. It involves purchasing government Bonds or other financial assets to inject liquidity into the financial system. By increasing money supply and lowering interest rates, QE encourages lending, investment, and consumer spending. While QE can boost asset prices and support economic recovery, excessive use may lead to inflation or asset bubbles. In the trading world, QE announcements often cause significant market reactions, especially in currency, Bond, and Stock markets, due to shifting interest rate expectations.
Example:
A central bank purchases government Bonds to inject liquidity into the economy during recessionary periods.
