In times when economic stimulation is needed, Quantitative Easing (QE) is an unconventional policy, but one which can bring about the inflation needed to help the economy of a nation or region to grow. QE essentially consists of increasing the amount of money in the banking system overall, usually through the purchase of government bonds and other securities. This helps to reduce interest rates, thereby increasing the money supply.
There is arguably historical evidence of QE having its desired effect. Following the 2008 financial crisis, the US Federal Reserve adopted the financial policy, buying bonds worth in excess of $3.7 trillion between 2008 and 2015. In the last few years, America has seen its economy stabilise and levels of unemployment go down, something which has been credited to QE, at least in part, by some financial analysts. Whilst the dollar did lose some value during this period, since the US ended its QE programme it has regained strength, which again many have attributed to the programme.
The European Central Bank (ECB) has adopted QE within the eurozone since the beginning of 2015, creating €60 billion every month. However, reports suggest that the policy has done little to stimulate the economy and achieve the desired inflation rate of 2%. One argument for the reason behind this is that flooding financial markets only results in inflated prices for bonds and shares. This achieves little to help either businesses or households, and simply allows those who are well off to accrue even greater wealth. This could in turn create a new financial bubble which may well result in another financial crisis further down the line.