This is the process whereby central banks create money electronically which enables them to buy government securities.

This is supposed to both create new funds for the sellers of these securities and reduce demand for very safe government assets as QE pushes up their price and squeezes their yield. Where this new money ends up is a matter of some debate – the central bank may hope it ends up creating new loans for businesses and individuals, however it may simply end up being used by banks to reduce their own funding costs. Tapering is the process whereby the pace of QE in terms of monthly purchases of government securities is slowed down and in some cases eventually stopped.

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