Effect of Quantitative Easing on Price of Bonds
Quantitative easing entails the creation of new bank reserves that are used to purchase government bonds (for example, from pension funds). This increases bond prices, which reduces bond yields and lowers interest rates in the real economy.
What is quantitative easing advantages and disadvantages?
Is quantitative easing good or bad?
Pros | Cons |
---|---|
Encourages borrowing/spending Boosts stock prices Increases economic growth | Hurts savers and non-investors Causes inflation and stagflation Lowers the value of the dollar |