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What Is Quantitative
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But what is quantitative easing? Here are some details:
What Is Quantitative Easing?
-- Quantitative easing, notably employed by Japan from 2001 until 2006, refers to ways of boosting economic growth after traditional monetary policy tools, such as interest rate targets, have been exhausted.
-- Central banks flood the banking system with masses of money, more than is needed to keep official interest rates at zero or a low rate, to shore up financial systems and promote lending. They usually do this by buying up large quantities of assets from banks.
Major Central Banks And Quantitative Easing:
* US Federal Reserve:
-- Economists agree the Fed's various programmes to boost the flow of credit through the expansion of its balance sheet to over $2 trillion can be regarded as a form of quantitative easing.
-- On March 3, the Fed announced the details of the Term Asset-backed Securities Loan Facility, TALF. A $200 billion programme to lend against securities backed by student, auto, credit card and business loans, TALF could expand to $1 trillion and include troublesome mortgage and debt securities from banks.
-- The Fed is buying highly rated, U.S.-dollar denominated, three-month commercial paper through a special purpose vehicle to run until Oct. 30.
-- In January, the Fed started a programme to buy $100 billion in the direct obligations of housing-related government sponsored enterprises -- Fannie Mae, Freddie Mac and the Federal Home Loan banks -- and $500 billion in mortgage-based securities backed by Fannie Mae, Freddie Mac and Ginnie Mae.
* European Central Bank
-- ECB policymakers have said they considering all options to extend its monetary toolbox further, although they stress that no decisions have been taken.
-- Economists polled by Reuters give a 40 percent chance to the ECB embarking on quantitative easing in the coming months.
* Bank Of Japan
-- Bank of Japan policymakers have not ruled out a return to quantitative easing, although they have said it is unlikely or at least not needed for now.
-- While not constituting quantitative easing, the Bank of Japan is to buy up to 1 trillion yen ($10 billion) of corporate bonds maturing within a year.
- It is also buying up to 1 trillion yen worth of shares held by Japanese banks. BOJ plans to sell the shares from Apr 2012 to Sept 2017.
* Bank Of England
-- The BoE has asked for permission from the British government to formally embark on full quantitative easing that would involve the purchase of gilts and other commercial assets using new money.
-- Finance minister Alistair Darling is expected to give the BoE the go-ahead to purchase between 40-150 billion pounds ($56-211 billion) with which to purchase assets on Thursday.
-- The central bank already buys commercial paper under its Asset Purchase Facility. However, the scheme does not constitute quantitative easing as it is financed by the issuance of Treasury bills.
* Other Central Banks
The Bank of Canada said on March 3 it would engage in quantitative easing if required after it cut its benchmark interest rate to a record low of 0.5 percent.
The Swiss National Bank has said it is studying unconventional measures such as foreign exchange interventions and quantitative easing to improve economic conditions.
The Bank of Israel said on Feb 16 it would start buying government bonds on the secondary market to improve liquidity.