Quantitative Easing: Overview, Goals, Drawbacks

What Is Quantitative Easing?

By Kristi Waterworth – Updated Mar 11, 2025 at 10:13 AM

Key Points

Quantitative easing stimulates the economy by increasing bank lending and consumer spending.
The Fed buys securities from banks, boosting their liquidity and lending capacity.
Potential risks include banks investing abroad and causing inflation by excessive liquidity.

The economy continues to be at the forefront of the news cycle, with lots of new concepts being thrown around for people who haven't really been interested in economics before. Along with things like inflation and the JOLTS report, a term we often hear is quantitative easing.

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Infographic defining and explaining quantitative easing — Image source: The Motley Fool

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Interest Rate

An interest rate is the cost of borrowing money or the premium you get for lending money. Learn how interest rates affect the economy.

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Treasury Bills (T-Bills)

A short-term debt issued and backed by the government, offering a low-risk investment with maturity typically under a year.

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Academic views on quantitative easing

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Another major risk is simply causing inflation to increase by putting too much money into the system too quickly. When there's a lot of cheap money lying around, it's easy for people to get whipped up into a frenzy and buy whatever they please. But if everyone is doing that, it can have the unintended effect of driving up prices because supply can't keep up with demand.

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About the Author

Kristi Waterworth has been a contributing real estate and financial expert at The Motley Fool, covering real estate, investing, and personal finance topics, since 2020. Kristi has been interviewed by various TV media outlets and podcasts for her real estate investing expertise – from residential real estate to digital real estate and everything in between. Kristi’s journalist career spans over 25 years, and she has written about real estate investing, homeownership, and home construction specifically for the last decade. She was also previously a licensed Realtor and general building contractor before the Great Recession and housing market collapse. She holds a bachelor’s degree in American history from Columbia College in Missouri.

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