Typically, central banks try to increase the amount of lending and economic activity indirectly, by cutting interest rates.
Lower interest rates encourage people to spend, not save. But when interest rates can go no lower, the only option is for the central banks to pump money into the economy directly. It is
quantitative easing (QE ).
How central banks do this is by buying assets - usually government bonds - using money that was created out of thin air.
Such institutions sell bonds (either commercial banks or other financial businesses such as insurance companies) it will have a " new " money in their accounts, which then increases the money supply.
Tried first by the central bank in Japan out of deflation period after the collapse of the asset bubble in the 1990s.
Before 2009, QE has never been tried before in the UK. Destination America makes
quantitative easing is to lower the interest rate of credit to people and corporations or other business entities can obtain a loan with an affordable interest rate. QE is expected to stimulate the American economy.
