Facebooktwittergoogle_plusredditpinterestlinkedinmail

Quantitative easing is the process in which a Central Bank such as the Bank of England will create new money electronically to help boost the economy and meet inflation targets.

The electronic money is typically used to purchase bonds from financial institutions such as banks. This, in theory, should the create a domino effect in which interest rates will be reduced, businesses and people borrow more, more spending will subsequently occur and therefore provide a boost to the economy.

Quantitative easing is ideally applied when interest rates are on the verge of zero percent.