Quantitative Effect Is A Significant Stock Market

Traditionally, central banks control the fate of an economy by manipulating the money supply. When short-term goal low interest rates, increased market liquidity such as flooding the system, and when raised short-term objectives of the interest rates, markets fell, as it tightens liquidity. So goes the typical monetary policy and the economic cycle.

In 2008, the Fed lowered interest rates near 0% in desperate bid to avoid another Great Depression and the collapse of the economy as a whole. When the central bank to cut rates that low, essentially puts itself into a corner. If the economy does not respond to close to 0% rates, what else can you do to promote economic growth and create demand? Enter quantitative easing.