What is quantitative easing (QE) and how does it work?

Quantitative easing (QE) is a form of unconventional monetary policy used by central banks to stimulate the economy when interest rates are already very low. In QE, the central bank buys large amounts of government bonds or other financial assets from the market to increase the money supply. The goal of QE is to lower long-term interest rates, encourage borrowing and investment, and support economic growth. By injecting liquidity into the financial system, QE can help prevent deflation and stabilize financial markets during periods of economic uncertainty. However, QE can also lead to asset bubbles and income inequality if it disproportionately benefits the wealthy.