Quantitative Easing

Quantitative Easing, Tapering and Tightening are open market strategies conducted by the Central Banks. The objective to manipulate Interest Rates at long end of the Yield Curve.

Monetary Policy is under the domain of the Central Banks, they control, set short term interest rates, but long term interest rates are determined by the market. The Central Bank in the U.S. is the Federal Reserve in Europe it is the ECB. Quantitative Easing being QE and QE2 are unconventional forms of implementing Monetary Policy and were employed as Short Term Interest Rates were already approaching zero. Thus, further reductions in Short Term Interest Rates were perceived to have a limited impact. QE is where a Central Bank conducts a strategy of open market transactions over a longer period of time. The Central Bank enters into the Bond Market to purchase longer-term securities, with the objective being to push down long term yields.