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Quantitative easing (QE): buying bonds to push down rates
2008–2014; 2020–2022· Concept
Fact, law or dataA rule, statute, definition or measured number.
Central-bank purchases of long-term bonds with newly created money, used when short-term rates are already near zero.
See it on the Money & Finance map →How it works
When it cannot cut short rates further, a central bank can still push down long-term rates. The Fed buys Treasuries or mortgage bonds from dealers and pays by crediting their banks' reserve accounts. Bond prices rise and yields fall, mortgage rates follow, and investors shift into stocks, corporate bonds and property. The Fed ran QE from 2008 to 2014, lifting its balance sheet from under $1 trillion to about $4.5 trillion, then again in 2020–22.
Why it matters
QE became a standard crisis tool, held mortgage rates low for over a decade and lifted asset prices, which critics say widened the wealth gap between owners of assets and everyone else.
Think of it like
Like a giant buyer entering a property market: heavy bidding lifts prices and pushes yields, the cap rates, down for everyone.
Facts, rules and data
The Fed's weekly balance sheet; studies estimating early QE cut 10-year Treasury yields by roughly 0.3 to 1 point; Bank of Japan records from 2001.
Debates and risks
How much QE helped jobs and growth versus mainly lifting asset prices, and how much it fed the 2021–23 inflation, are debated.
Inside this (1)
Connections (7)
▸Quantitative easing (QE): buying bonds to push down rates pushes down The 10-year Treasury yieldMainstream view
The connection
The Fed buys long-term Treasuries and mortgage bonds with newly created reserves. Heavy buying lifts bond prices and lowers yields, takes long-term rate risk out of private hands so investors accept a smaller term premium, and signals that short rates will stay low for a long time.
When and why
Most vividly on March 18, 2009, when the Fed announced Treasury purchases and the 10-year yield fell about half a point in a day; later rounds ran 2010–14 and 2020–22.
How solid is the link?
Fed economists Gagnon, Raskin, Remache and Sack (2011) estimated the first round cut the 10-year term premium by 0.3 to 1 point; other event studies broadly agree.
Debates and risks
Later rounds seemed to matter less, and yields sometimes rose during buying as growth hopes improved. How much reversing QE (QT) raised yields is also debated.
▸Quantitative easing (QE): buying bonds to push down rates expanded The Fed's balance sheet and quantitative tightening (QT)Fact, law or data
The connection
Every QE purchase adds a bond to the Fed's assets and an equal amount of new reserves to its liabilities. Three rounds after 2008 took total assets from about $0.9 trillion to $4.5 trillion; the 2020–22 pandemic round roughly doubled that again, to nearly $9 trillion.
When and why
QE1 began in November 2008, QE2 in 2010 and QE3 in 2012–14; pandemic QE ran from March 2020 to March 2022, all ordered by the FOMC.
How we know
The weekly H.4.1 balance sheet shows each step, including more than $4 trillion of Treasuries and mortgage bonds bought in 2020–22.
Debates and risks
Whether the Fed should have kept buying into early 2022 while inflation was already rising is widely questioned, including by some Fed officials.
▸Quantitative easing (QE): buying bonds to push down rates bought trillions of Mortgage-backed securities (MBS)Fact, law or data
The connection
In QE the Fed bought mortgage bonds directly, bidding up their prices and lowering their yields. Lenders price new loans off MBS yields, so mortgage rates fell; the 30-year rate hit a record low of about 2.65% in January 2021. The Fed's MBS holdings peaked near $2.7 trillion in 2022, roughly a third of the agency market.
When and why
Announced November 25, 2008; purchases in 2009–10, 2012–14 and 2020–22, run by the New York Fed. Since December 2025 MBS paydowns are reinvested in T-bills.
How we know
The Fed's weekly balance sheet shows the holdings; studies found mortgage spreads over Treasuries dropped sharply on QE announcements.
Debates and risks
Whether MBS buying helped inflate 2020–22 house prices, and whether the Fed should hold only Treasuries to avoid favoring housing, is debated.
▸Quantitative easing (QE): buying bonds to push down rates is accused of widening Income and wealth inequalityExperts disagree
The connection
QE lowers long-term rates and pushes investors into riskier assets, lifting stock, bond and home prices. Since the richest 10% own most stocks, they gain most in dollars. Defenders reply that QE also supported jobs and wages, which matter most to lower-income households, and that without it the downturns would have been worse.
When and why
US, UK, eurozone and Japan, 2008–2022; critics include Fed dissenters and Kevin Warsh, while Fed and Bank of England researchers have weighed both sides.
How solid is the link?
Asset prices clearly rose during QE. A 2012 Bank of England report found the top 5% of households held about 40% of the assets QE boosted; net-effect studies split.
Debates and risks
Whether QE widened inequality overall, once job gains and cheaper borrowing are counted, remains genuinely contested among central-bank researchers.
▸Ben Bernanke, Fed chair 2006–2014 launched Quantitative easing (QE): buying bonds to push down ratesFact, law or data
The connection
With the fed funds rate at near zero by December 2008, Bernanke's Fed had no room left to cut. Drawing on his study of the Depression and of Japan, he pushed large purchases of mortgage bonds and Treasuries to lower long-term rates. He preferred to call it 'credit easing'.
When and why
First announced November 25, 2008, and expanded in March 2009; QE2 followed in November 2010 and QE3 in September 2012, all under Bernanke.
How we know
FOMC statements and transcripts, his January 2009 'credit easing' speech, and his memoir document the decisions.
Debates and risks
Japan tried QE first, in 2001; how much Bernanke's version improved on it, and whether his 2013 hint of slowing purchases, the 'taper tantrum', was mishandled, are debated.
▸Japan's bubble and 'lost decades' (1990–) saw the first use of Quantitative easing (QE): buying bonds to push down ratesFact, law or data
The connection
After Japan's 1990 bubble burst, growth stalled, consumer prices began falling in the late 1990s, and the Bank of Japan cut rates to zero in 1999. Still facing deflation, in March 2001 it began buying government bonds to flood banks with reserves, the first modern QE. It returned on a far larger scale from 2013 under Governor Haruhiko Kuroda.
When and why
Bank of Japan, Tokyo, March 2001 to March 2006; 'quantitative and qualitative easing' from April 2013.
How we know
Bank of Japan policy statements and balance-sheet data; Bernanke and other economists studied the episode closely before 2008.
Debates and risks
Japan's early QE had modest effects; whether it was too small, too late, or proof that QE has limits is debated.
▸Japanese government bonds (JGBs) after yield-curve control were bought by the BOJ through Quantitative easing (QE): buying bonds to push down ratesFact, law or data
The connection
From April 2013 the BOJ's 'quantitative and qualitative easing' bought JGBs at up to about ¥80 trillion a year, aiming for 2% inflation, and its share of JGBs rose to around half. Since July 2024 it has cut purchases step by step, so private investors must absorb more bonds.
When and why
Tokyo; Governor Haruhiko Kuroda launched the program, and Kazuo Ueda began the taper.
How we know
BOJ policy statements and holdings data, and Ministry of Finance JGB statistics.
Debates and risks
How smoothly markets can absorb the bonds the BOJ no longer buys, especially long-dated ones.