<P> Quantitative easing ( QE ) , also known as large - scale asset purchases , is an expansionary monetary policy whereby a central bank buys predetermined amounts of government bonds or other financial assets in order to stimulate the economy and increase liquidity . An unconventional form of monetary policy , it is usually used when standard monetary policy has become ineffective at combating too low inflation or deflation . A central bank implements quantitative easing by buying specified amounts of financial assets from commercial banks and other financial institutions , thus raising the prices of those financial assets and lowering their yield , while simultaneously increasing the money supply . This differs from the more usual policy of buying or selling short - term government bonds to keep interbank interest rates at a specified target value . </P>
quantitative easing refers to the process whereby the federal reserve
buys predetermined amounts of government bonds or other financial assets in order to stimulate the economy and increase liquidity