Quantitative easing (QE)

A policy introduced to alleviate the effects of the 2007-09 financial crisis. Central banks slashed interest rates but the effect of such cuts seemed to diminish as they approached the zero lower bound. Quantitative easing (QE) involved banks buying government bonds (and some other assets) in the secondary market and creating new money to pay the sellers (see this Explainer). This had the double effect of injecting liquidity into the economy and pushing down bond yields, cutting the cost of borrowing for the corporate sector. Critics argue that QE is hard to reverse (see this article) and is perilously close to monetary financing.