What Is Quantitative Easing (QE)?
Quantitative easing is a central bank buying large amounts of bonds to push down longer-term interest rates when short-term rates are already low. How it works, what the Fed's balance sheet did, and how quantitative tightening reverses it.
In one sentence
Quantitative easing (QE). A central bank buying large amounts of bonds or other assets to add money to the economy and push down longer-term interest rates.
How it works
When short-term rates are already near zero, a central bank can't cut them much further. Instead it can buy large amounts of longer-term bonds, such as Treasuries and mortgage-backed securities. It pays by creating reserves, so its balance sheet and the money in the banking system grow together, and the extra demand for bonds pushes down longer-term yields.
| December 2007 | $0.89 trillion |
|---|---|
| February 2020 | $4.16 trillion |
| April 2022, the peak | $8.97 trillion |
| October 2026 | $6.75 trillion |
Federal Reserve figures.1
Quantitative tightening
The reverse is Quantitative tightening. A central bank shrinking its balance sheet, usually by letting bonds it holds mature without replacing them. It is the reverse of quantitative easing. Glossary: letting bonds mature without replacing them. From June 1, 2022, the Fed reinvested principal only to the extent it exceeded monthly caps, which for Treasuries started at $30 billion a month and rose to $60 billion.2 It ended the reduction of its holdings on December 1, 2025.3
Learn it properly
- Money, Banking, and CreditEconomics for Investors (depth track)
- The Federal Reserve's ToolkitEconomics for Investors (depth track)
Notes and sources
- Federal Reserve Bank of St. Louis (FRED), from the Board of Governors of the Federal Reserve System. Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday Level (WALCL), weekly. Checked 2026-10-14. Back to text
- Board of Governors of the Federal Reserve System. Plans for Reducing the Size of the Federal Reserve's Balance Sheet (May 4, 2022). Checked 2026-10-14. Back to text
- Board of Governors of the Federal Reserve System. Federal Reserve issues FOMC statement (October 29, 2025). Checked 2026-10-14. Back to text