Quantitative
Easing.
QE is the central bank buying assets and creating reserve balances to pay for them. Government spending is a separate decision. Watch who sells the asset, whose balance sheet changes, and whether a deposit is created alongside the reserves.[1][2]
Check before acting. Rates, prices, fees and product terms change often. Confirm the current figures with the provider or the linked source before you act.
QE purchases push on longer-term yields and financial conditions. They do not force banks to lend or every asset price to rise. Buying from a bank swaps its bond for reserves; buying from a nonbank seller also credits that seller’s bank deposit. Neither one is a fiscal transfer to a household.[1][2]
On this page
What QE actually is
In the Fed’s large-scale asset purchases, the New York Fed buys eligible Treasury and agency securities in the secondary market through counterparties. Paying for them creates reserves. The seller may be a bank, or a nonbank investor settling through one, and the balance-sheet result differs.[1][2]
The reserves are new. They did not exist before the trade. No taxpayer funded them. The Fed created them by keystroke, the same way a commercial bank creates a deposit when it makes a loan.
Parallel $100 examples (illustrative, ignoring fees and valuation changes):
QE from a bank: the Fed adds a $100 Treasury bond asset and a $100 reserve liability; the bank exchanges a $100 bond asset for $100 of reserves. No customer deposit must be created.
QE from a nonbank seller: the Fed again adds the bond and reserves; the seller’s bank adds $100 reserves and a $100 deposit liability; the seller exchanges a $100 bond for a $100 deposit. This is an asset swap, not a fiscal transfer, and does not give the seller $100 of additional net wealth at the transaction price.
Treasury spending: for an authorized $100 payment from an existing Treasury General Account balance, that Fed liability falls $100 while the recipient bank’s reserves rise $100; the bank credits the recipient’s deposit $100. Taxes or borrowing replenish Treasury cash separately. A bond purchase by a nonbank investor using a deposit moves funds toward Treasury’s account before spending moves them out; the net effects depend on both legs. QE does not itself authorize Congress’s spending or purchase a new Treasury issue directly.[1][2][3]
Fed balance-sheet history
Before 2008 the Fed's balance sheet was a boring, slow-growing pool of Treasury bills. That changed in September 2008. The chart below is the numbers.
Show the data as a table
| Month | Observation date (Wednesday) | Total assets ($B) |
|---|---|---|
| 2002-12 | 2002-12-25 | 732.1 |
| 2003-12 | 2003-12-31 | 771.6 |
| 2004-12 | 2004-12-29 | 810.9 |
| 2005-12 | 2005-12-28 | 847.7 |
| 2006-12 | 2006-12-27 | 870 |
| 2007-12 | 2007-12-26 | 890.7 |
| 2008-12 | 2008-12-31 | 2239.5 |
| 2009-12 | 2009-12-30 | 2234.1 |
| 2010-12 | 2010-12-29 | 2420.6 |
| 2011-12 | 2011-12-28 | 2926.1 |
| 2012-12 | 2012-12-26 | 2907.3 |
| 2013-12 | 2013-12-25 | 4032.6 |
| 2014-12 | 2014-12-31 | 4497.7 |
| 2015-12 | 2015-12-30 | 4486.6 |
| 2016-12 | 2016-12-28 | 4451.5 |
| 2017-12 | 2017-12-27 | 4448.7 |
| 2018-12 | 2018-12-26 | 4075.6 |
| 2019-12 | 2019-12-25 | 4165.6 |
| 2020-12 | 2020-12-30 | 7363.4 |
| 2021-12 | 2021-12-29 | 8757.5 |
| 2022-12 | 2022-12-28 | 8551.2 |
| 2023-12 | 2023-12-27 | 7712.8 |
| 2024-12 | 2024-12-25 | 6886 |
| 2025-12 | 2025-12-31 | 6640.6 |
| 2026-09 | 2026-09-23 | 6747.7 |
QT1 took back about $0.7 trillion and QT2 about $2.4 trillion before each ended, and neither came close to the pre-2008 level. Since QT2 ended, the Fed has been buying shorter-term Treasury securities to keep reserves ample (FOMC statement, December 10, 2025); total assets are up $212 billion from the December 3, 2025 low. The chart plots month-end values; the weekly peak was $8.97 trillion on April 13, 2022.
The four rounds of QE
QE was sold as a one-time emergency tool in 2008. It has been used four times since.
Intended effects
QE is designed to do three things. All three are transmission-mechanism arguments, not end-state arguments.
Actual effects
What QE did depends on the episode and on what would have happened without the purchases. Portfolio rebalancing and policy signaling lower yields and support spending. Critics point at asset valuations and distribution; the employment channel can reach workers who own no assets. No before/after chart separates QE from fiscal support, supply shocks or other policy.[1][2][4]
The S&P 500 rose roughly sevenfold from the 2009 low to the 2022 high. Median U.S. home prices doubled. Asset owners got richer on paper without a corresponding rise in real output. When consumer inflation finally arrived in 2021-2022, it hit people who had never received the asset gains.
The top 10 percent own roughly 90 percent of U.S. stocks. When QE lifts equity prices, that benefit is concentrated. Wage earners who own no equities see nothing until the price of groceries and rent catches up, at which point they take the loss.
For the mechanism in detail, see The Cantillon Effect and The Wealth Gap.
Quantitative Tightening (QT)
QT shrinks central-bank asset holdings through runoff or sales. Reserve balances do not fall one-for-one with it: the Treasury General Account, reverse repos, currency and other Fed liabilities all move reserves too. Household deposits are a separate balance-sheet category.[3]
The Fed ran its first QT from late 2017 to mid-2019, trimming the balance sheet from roughly $4.5T to roughly $3.8T before the September 2019 repo market crisis forced a pivot. QT 2.0 began in June 2022, at a faster pace, and brought the balance sheet from $8.9T down to roughly $6.5T before it ended on December 1, 2025.
QE is politically easy. QT is politically hard. Every round of QT so far has been paused or reversed before the balance sheet returned to pre-crisis levels. The ratchet goes up in crises and only partly comes back down in good times. The long-run trend is up.
One note on taxpayer cost: QE is not funded by taxpayers in the traditional sense. But the Fed now pays interest on the reserves those QE purchases created. In a high-rate environment, that interest bill can exceed the Fed's income from its bond holdings, producing large operating losses that reduce remittances to Treasury for years.
Where to go from here
Sources
Bracketed numbers in the text link to these sources. Figures, rates and rules change: check each source’s date before acting on it.
- Bank of England Quarterly Bulletin 2014 Q1 ↩
- Federal Reserve Bank of New York. "Large Scale Asset Purchases" (QE program page) - newyorkfed.org ↩
- FRB: Table 1 description from Fed's balance sheet ↩
- The Fed - How does the Federal Reserve affect inflation and employment? ↩
- Federal Reserve Bank of St. Louis FRED. "Assets: Total Assets (WALCL)" - fred.stlouisfed.org/series/WALCL
- Federal Reserve Board. H.4.1 Statistical Release "Factors Affecting Reserve Balances" - federalreserve.gov/releases/h41
- FOMC Statement March 15, 2020 - announcement of pandemic QE - federalreserve.gov
- Federal Reserve Board. "Distributional Financial Accounts" - equity ownership by wealth decile - federalreserve.gov/releases/z1/dataviz/dfa/
- Federal Reserve Bank of New York. "Repo Market LiquidityliquidityHow quickly and easily you can convert an asset to cash without significantly affecting its price.Full definition and Yield-Curve Volatility" - September 2019 repo event - libertystreeteconomics.newyorkfed.org
- Bernanke, B. "The Crisis and the Policy Response" Stamp Lecture, January 2009 - federalreserve.gov
- Consumer Price Index Frequently Asked Questions : U.S. Bureau of Labor Statistics
- Employed full time: Median usual weekly real earnings: Wage and salary workers: 16 years and over (LES1252881600Q) | FRED | St. Louis Fed
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