quantitative easing by the major western central banks during the global financial crisis

After rapidly cutting short-term interest rates to their effective lower bounds during the financial crisis of 2008–09, central banks in the USA and UK turned to quantitative easing (QE) in order to sustain aggregate demand and avoid a Japanese style deflationary spiral. The European Central Bank eschewed large-scale asset purchases, but instituted a number of major lending programs that significantly increased the size of its balance sheet. Existing studies suggest that the initial rounds of QE provided a significant boost to both growth and inflation in the USA and UK, whilst the evidence on the impact of the ECB's actions has also been favourable. One area of disappointment, however, was the inability of unconventional policies to generate a material revival in bank lending. Meanwhile, fears that QE would fuel a sharp acceleration in inflation have so far proven misplaced, although central banks will need to be increasingly alert to the risks once more sustainable economic recoveries begin to emerge. Policymakers must also pay significant attention to the financial stability risks associated with the long period of extremely accommodative monetary policy.