Quantitative Easing (QE)
A Federal Reserve policy of large-scale asset purchases, primarily Treasuries and MBS, to lower long-term interest rates and stimulate the economy when short-term rates are near zero.
What is Quantitative Easing (QE)?
The Fed has conducted four rounds of QE: QE1 (2008-2010, $1.75 trillion), QE2 (2010-2011, $600 billion), QE3 (2012-2014, $1.6 trillion), and QE4 (2020-2022, $4.9 trillion during COVID). Purchases are made through primary dealers, injecting reserves into the banking system, which peaked at $8.9 trillion in April 2022. For example, QE reduced 10-year Treasury yields by about 100 basis points during the Great Recession.
QE works by signaling commitment to low rates, reducing term premiums, and encouraging lending; studies show it boosted GDP by 3% and employment by 2 million jobs post-2008. However, it increased the Fed’s balance sheet from $900 billion pre-2008 to $7.2 trillion in 2025, raising concerns over asset bubbles in stocks (S&P 500 up 400% since 2009).
In 2025, with rates above zero, QE is not active, but the Fed holds $4.5 trillion in Treasuries and $2.3 trillion in MBS, allowing gradual runoff at $25 billion monthly for MBS.
Related Terms
Proof of Work
Proof of Work (PoW) is a consensus algorithm where nodes (miners) solve complex cryptographic puzzles to validate transactions and add new blocks to a blockchain.
Blockchain Trilemma
The blockchain trilemma refers to the challenge of balancing three core properties—decentralization, security, and scalability—in a blockchain network, where optimizing one often compromises the others.
Dot Plot
A chart released quarterly by the Federal Reserve showing anonymous projections from FOMC members for future federal funds rates.
ETF
Exchange-Traded Funds that hold baskets of assets and trade on stock exchanges, providing regulated exposure to digital assets.
Digital Payments
Electronic transfers of value using digital channels, replacing cash.
51% Attack
A 51% attack occurs when a single entity or group controls over 50% of a blockchain’s computing power or stake, allowing them to manipulate the network’s transaction ledger.