What is Quantitative Easing? This term is commonly heard but many people still do net get what it is.
- You must know that Quantitative Easing is unconventional policy on monetary usually applied by central banks to give stimulation to the national economy.
- This policy is taken when the conventional policy is no longer effective to cover economic upheavals. This term means, central banks buy financial assets for injecting money to the economy.
- This policy is quite popular taken by central banks in the world to buy and sell government bonds.
- This policy will keep the interest rates of the market still in the targeted value.
Central banks applies quantitative easing (QE) by buying the financial assets from private or government banks and other business sectors with new created money. Because of this policy, the excess reserves belong to the banks will increase. It will also help the price of the financial assets that have been brought by central bank increases.
So, when you are asking about What is Quantitative Easing, we have to tell you that this is a policy taken by central bank to repair the condition of the economy. Like we mentioned before that this policy is not like the conventional policies but it has been proven as effective strategy to repair or bring back the normal condition of the economy.
Quantitative Easing is popularly taken by central especially when want to ensure that the inflation does not fall under the prediction or target. However, when quantitative easing is taken, usually the stock exchange and currency exchange will be affected. Big countries like U.S., UK, France, Germany and Japan have ever taken this policy to keep their economy stands properly. Now, you know what Quantitative Easing is. For you businessmen, this policy will help you maintain ideal condition.
Nowadays, US has implemented many Quantitative Easing policies for their economy, this is to push economic wheels and spread money to real sectors. The money should not be stored in financial instruments by banks or other institutions. People should care about their country and spend money for productive investment such as buy equipments, machines for productions, and also hire creative people for their critical business when economy still in crisis.