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Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the economy when standard monetary policy has become ineffective.[1][2][3] A central bank implements quantitative easing by buying specified amounts of long termfinancial assets from commercial banks and other private institutions, thus increasing themonetary base and lowering the yield on those financial assets.[4] This is distinguished from the more usual policy of buying or selling government bonds in order to keepinterbank interest rates at a specified target value.[5][6][7][8]

Expansionary monetary policy typically involves the central bank buying short-term government bonds in order to lower short-term market interest rates.[9][10][11][12] However, when short-term interest rates are at or close to zero, normal monetary policy can no longer lower interest rates.[13] Quantitative easing may then be used by monetary authorities to further stimulate the economy by purchasing assets of longer maturity than short-term government bonds, and thereby lowering longer-term interest rates further out on the yield curve.[14][15] Quantitative easing raises the prices of the financial assets bought, which lowers their yield.[16]

Quantitative easing can be used to help ensure that inflation does not fall below target.[8]Risks include the policy being more effective than intended in acting against deflation(leading to higher inflation in the longer term, due to increased money supply),[17] or not being effective enough if banks do not lend out the additional reserves.[18] According to the IMF and various other economists, quantitative easing undertaken since the globalfinancial crisis of 2007–08 has mitigated some of the adverse effects of the crisis.[19][20][21]

http://en.wikipedia.org/wiki/Quantitative_easing

Definition: Quantitative easing (QE) is the Federal Reserve'sprogram of buying bonds from its member banks. The Fed purchases U.S. Treasury notes and mortgage-backed...