Why do we use quantitative easing?
It’s our job to keep the prices of things you buy low and stable, as this helps to support people’s jobs and incomes.
Rising prices is called inflation and the UK government has set us an inflation target.
To keep inflation on target we usually change a key interest rate in the economy (called Bank Rate). Changes in Bank Rate feed through to how much interest you get on savings, and how much interest you pay on a loan. That affects the amount of spending in the economy and so helps inflation to either fall or rise.
But things changed during the Global Financial Crisis that began in 2008. At that time, we quickly reduced Bank Rate from 5% to 0.5% to help the UK economy recover.
Even with Bank Rate that low, we needed to do more to boost the economy and meet our inflation target. That’s where quantitative easing comes in.