How quantitative easing works

The ECB started buying assets from commercial banks in March 2015 as part of its non-standard monetary policy measures. These asset purchases, also known as quantitative easing or QE, support economic growth across the euro area and help us return to inflation levels below, but close to, 2%.

Explore how the asset purchase programme works

  1. The European Central Bank buys bonds from banks.
  2. This increases the price of these bonds and creates money in the banking system.
  3. As a consequence, a wide range of interest rates fall and loans become cheaper.
  4. Businesses and people are able to borrow more and spend less to repay their debts.
  5. As a result, consumption and investment receive a boost.
  6. Higher consumption and more investment support economic growth and job creation.
  7. As prices rise, the ECB achieves an inflation rate below, but close to, 2% over the medium term.

Source: European Central Bank

Published: 9 Dec 2016

The above presentation was created for educational purposes.


 

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