Quantitative Easing (QE) is an unconventional monetary policy where central banks purchase large quantities of government bonds and other securities to inject money directly into the economy when interest rates are already near zero. QE aims to stimulate economic activity by increasing money supply and encouraging lending and investment.

QE programs significantly impact financial markets by increasing liquidity, reducing long-term interest rates, and often weakening currency values. These policies affect commodity prices, equity valuations, and currency exchange rates as investors seek higher yields and inflation hedges. Understanding QE implications helps anticipate market reactions and policy impacts.

Real-world example: Federal Reserve QE programs purchasing $120 billion monthly in bonds cause USD to weaken, gold prices to rise, and equity markets to rally as increased money supply and lower rates drive investors toward risk assets and inflation hedges.