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Fundamental analysis

Quantitative Easing

By Jarosław Wasiński • Published: • Updated:
Central-bank asset purchases intended to ease financial conditions when used as a monetary-policy tool. Purchases alter the central bank’s balance sheet and can affect yields and portfolio choices. Their exchange-rate impact is conditional, not an automatic currency depreciation of a predictable size.
Example.

In a simplified model, a central bank buys bonds worth 100 million units from a bank: its assets increase by bonds and liabilities by reserves. This is not a transfer of 100 million to every consumer or a guarantee of proportional CPI growth or currency depreciation.

Balance sheets and asset prices

Purchases can affect yields, liquidity and portfolios. Transactions with different sellers have different deposit effects. Distinguish reserves, circulating cash and broader money aggregates.

Announcements, flows and stocks

A programme may be priced before purchases begin. Current purchase pace, total holdings and reinvestment rules carry different information. The expected path matters beyond one transaction's size.

QE and QT

QT can involve stopping reinvestment or selling assets. It does not mechanically reverse every QE response. FX effects depend on relative policy, inflation, growth and liquidity demand.

Primary source checked 11 October 2026: www.ecb.europa.eu.

FAQ

Does QE always create proportional inflation?

No. Transmission depends on demand, credit, expectations and other conditions; there is no fixed purchases-to-CPI multiplier.

Does QT always strengthen a currency?

No. Pricing, the rest of the policy package and the other economy all matter.

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Jarosław Wasiński

Editor-in-chief, ForexMechanics.com • Macro & FX analyst

Independent analyst and practitioner with over 20 years of experience in financial markets. Actively involved in Forex since 2007, with a focus on fundamental analysis, OTC market structure, and disciplined capital risk management.

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