(QE) is a form of monetary policy in which central banks of countries, like, for example, the ECB
or the Bank of Japan
, purchase securities for their portfolio - more often domestic government bonds, but also other types of assets. The purpose of replenishing the portfolio of Central Banks is to stimulate the country’s economy, increase the money supply, and revive lending. Buying securities also helps lower interest rates.
QE work stages:
1. The central bank buys assets, thereby increasing the money supply.
2. Then, new money enters the economy, and the country’s financial institutions receive more funds.
3. The economy is artificially stimulated.
4. Interest rates start to decline.
5. Loans for individuals and businesses become more affordable.
6. Bond yields fall, and investors start to invest in stocks, which stimulates growth in the market as a whole.
Japan is considered the founder of quantitative easing; in 2001-2006, the Central Bank of Japan began to use QE to curb deflation.
Then, in 2008, they were joined by the US Federal Reserve and many other developed countries.
Emerging economies like Poland
only launched the program in 2020.
Inflation can be a serious danger when using quantitative easing.
Another negative consequence could be the creation of a bubble in the stock market.
In addition, income inequality may arise due to the impact on the value of not only financial assets but also real ones, such as real estate.