Stimulating an economy
On top of that they also “printed” money via Quantitative Easing (QE). In a nutshell, this involved them making more-or-less compulsory purchases of government and corporate bonds (or “IOUs”) from institutions such as pension funds and life assurance companies in return for additional electronic liquidity (“money printing” as it became known). The idea was that this extra cheap funding would find its way out into the economy via loans to companies and consumers and/or asset purchases. Many ascribe at least some of the recent stock market boom to this process. More recently though, the Federal Reserve has been leading the way in slamming both of these monetary gears – interest rates and QE – into reverse.
Interest rate policy
The basics of QT
Over time, the Federal Reserve hopes to “shrink its balance sheet” in this way and reduce the $4trn debt pile it has accumulated through its debt purchases that were part of the previous QE program. It all sounds simple enough, but it is not without risk.