Quantitative easing (QE) is a central bank's purchase of longer-term bonds on a large scale, paid for with newly created bank reserves, to push long-term interest rates down once cutting its short-term rate is no longer enough. The Federal Reserve calls its programs large-scale asset purchases and bought Treasury notes and bonds plus mortgage-backed securities (MBS) guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. Quantitative tightening (QT) reverses the process by letting those holdings mature without replacement. Both change how much long-term debt private investors must hold, one of the forces behind what moves Treasury yields and a recurring theme across the Treasuries hub.
How does quantitative easing work?
The Fed buys bonds from dealers and pays by crediting reserves to banks' accounts at the Fed, so its assets and its liabilities grow by the same amount.
Reserves are balances that banks and other depository institutions keep at the Fed. They averaged $11.9 billion in the week to September 3, 2008, and purchases lifted them to a peak of $4.28 trillion in the week to December 8, 2021.
Worked example: What a $10 billion purchase does to three balance sheets
Illustrative numbers. The New York Fed's trading desk, acting for the Federal Open Market Committee (FOMC), buys $10 billion of 10-year Treasury notes from a dealer.
| Balance sheet | Assets | Liabilities |
|---|---|---|
| Federal Reserve | +$10 billion of notes | +$10 billion of reserves owed to the dealer's bank |
| Dealer's bank | +$10 billion of reserves | +$10 billion deposit owed to the dealer |
| Dealer | −$10 billion of notes, +$10 billion deposit | No change |
Investors now hold $10 billion less of 10-year notes and $10 billion more of deposits, and no banknotes are printed. The reserves stay in the banking system until the Fed shrinks its holdings or another Fed liability, such as currency or the Treasury's account, absorbs them.
The effect works mainly through prices. Taking long bonds out of private hands leaves investors with less interest-rate risk to carry, so they accept a smaller term premium. Bonds with a longer duration carry more of that risk per dollar, and the Fed's goal was lower longer-term rates, so it bought notes, bonds and MBS rather than bills. A March 2010 New York Fed staff report by Joseph Gagnon, Matthew Raskin, Julie Remache and Brian Sack found that the first round lowered yields mainly by shrinking risk premiums, not by lowering expected short-term rates.
How much did the Fed buy, and when?
The Fed ran four rounds of purchases between 2008 and 2022, and the last, during the pandemic, was by far the largest.
| Round | Dates | Purchases |
|---|---|---|
| First | December 2008 to August 2010 | $1.25 trillion of MBS and $175 billion of agency debt, plus $300 billion of longer-term Treasuries from March to October 2009 |
| Second | November 2010 to June 2011 | $600 billion of longer-term Treasuries, about $75 billion a month |
| Third | September 2012 to October 2014 | $40 billion a month of MBS, joined by $45 billion a month of longer-term Treasuries from January 2013 |
| Pandemic | March 2020 to early March 2022 | At least $500 billion of Treasuries and $200 billion of MBS pledged on March 15, 2020, then at least $80 billion and $40 billion a month |
Total assets, which in late 2008 also swelled with emergency loans, grew from $910 billion on August 27, 2008 to $4.49 trillion on October 29, 2014. The pandemic round took them from $4.31 trillion on March 11, 2020 to a peak of $8.97 trillion on April 13, 2022. Its purchases were cut in steps from November 2021 and ended in early March 2022.
What is quantitative tightening?
Quantitative tightening shrinks the Fed's holdings by letting bonds mature without replacement, up to a monthly cap, instead of selling them.
Monthly runoff = the smaller of principal received and the monthly cap
Principal above the cap is reinvested, which for Treasuries means rolling it into new securities at auction. The FOMC has changed the caps several times:
| Start | Treasury cap per month | Agency debt and MBS cap per month |
|---|---|---|
| October 2017 | $6 billion, raised by $6 billion every three months to $30 billion | $4 billion, raised by $4 billion every three months to $20 billion |
| May 2019 | $15 billion | $20 billion |
| August 2019 | Runoff ended | Runoff ended; up to $20 billion a month reinvested in Treasuries |
| June 2022 | $30 billion | $17.5 billion |
| September 2022 | $60 billion | $35 billion |
| June 2024 | $25 billion | $35 billion, any excess reinvested in Treasuries |
| April 2025 | $5 billion | $35 billion |
| December 1, 2025 | Runoff ended; all principal rolled over | Runoff ended; all principal reinvested in Treasury bills |
The first round of runoff cut total assets from $4.46 trillion on October 4, 2017 to $3.76 trillion on August 28, 2019. In the second, securities holdings fell by more than $2.2 trillion, about $1.6 trillion of Treasuries and $600 billion of MBS, and from 33% to 20% of nominal GDP, by the Fed's count. Total assets bottomed at $6.54 trillion on December 3, 2025. The FOMC stopped because money markets suggested reserves were nearing the ample level it wants to keep, as its 2022 plans had foreseen.
Worked example: One month of runoff under three sets of rules
Illustrative month: $80 billion of the Fed's Treasury notes mature and its MBS repay $15 billion, close to the $14.6 billion the New York Fed plans to reinvest from October 15 to November 13, 2026.
- September 2022 caps, $60 billion and $35 billion: $60 billion of Treasuries and all $15 billion of MBS run off, and $20 billion is rolled over. Holdings shrink by $75 billion.
- April 2025 caps, $5 billion and $35 billion: $5 billion of Treasuries and $15 billion of MBS run off, and $75 billion is rolled over. Holdings shrink by $20 billion.
- Rules since December 1, 2025: all $80 billion is rolled over and the $15 billion of MBS principal buys Treasury bills. Holdings stay the same size, but $15 billion shifts from mortgages to bills.
Does quantitative easing lower long-term yields?
Research reviewed by the Fed generally finds that it does, putting the combined effect of purchases through mid-2012 at 80 to 120 basis points on 10-year yields.
In his August 2012 Jackson Hole speech, Chairman Ben Bernanke cited studies finding that the first round, $1.7 trillion of Treasury and agency securities, cut the 10-year yield by 40 to 110 basis points, and that the $600 billion second round took off another 15 to 45. The goal was the Fed's mandate of maximum employment and stable prices, with inflation now judged by PCE inflation.
One announcement day shows the scale. On March 18, 2009 the FOMC said it would buy up to $300 billion of longer-term Treasuries, and the 10-year yield fell from 3.02% to 2.51%. For a note with a modified duration of about 8.5, a 0.51-point drop lifts the price by roughly 8.5 × 0.51 = 4.3%, the arithmetic of why bond prices fall when rates rise run in reverse.
Yields still answer to growth, inflation and the expected path of the federal funds rate. During the second round, from November 3, 2010 to June 30, 2011, the 10-year yield rose from 2.67% to 3.18%. The FOMC's 2022 principles also name the federal funds rate, not the balance sheet, as its "primary means of adjusting the stance of monetary policy."
Where does the Fed's balance sheet stand now?
As of November 2, 2026 the Fed is neither buying long-term bonds nor letting its holdings run off, so its securities portfolio is roughly flat in size.
Runoff ended on December 1, 2025. From December 12 the New York Fed bought Treasury bills to keep reserves ample as demand for Fed liabilities grew: about $40 billion a month through April 13, 2026, then $25 billion, then $10 billion a month until August 13, about $215 billion in all. Roberto Perli, who manages the Fed's portfolio, said on September 22, 2026 that these reserve management purchases had been cut "to zero since mid-August" and "are never on a preset course." The October 28, 2026 directive still allows bill purchases when appropriate and sends all MBS principal into bills.
| Week ended October 28, 2026, daily average | Amount | Change from a year earlier |
|---|---|---|
| Treasury securities | $4.58 trillion | +$379.3 billion |
| Of which Treasury bills | $571.0 billion | +$375.5 billion |
| Mortgage-backed securities | $1.89 trillion | −$187.0 billion |
| Reserve balances | $2.89 trillion | +$45.7 billion |
Total assets were $6.75 trillion on Wednesday, October 28, $158.6 billion more than a year earlier, with bills doing nearly all of the growing. Reserves are what remains once the Fed's other liabilities take their share:
Reserve balances = factors supplying reserves − factors absorbing reserves other than reserve balances
That week it came to $6,804.4 billion − $3,910.7 billion = $2,893.8 billion. The biggest absorbers were currency at $2,484.5 billion, the Treasury's general account at $999.7 billion and reverse repos at $330.4 billion, so reserves can fall while the portfolio stays flat, for instance when tax receipts swell the Treasury's account.
With reserves this plentiful, the Fed steers short-term rates through the rates it sets. Banks earn 3.90% on reserves, inside a federal funds target range of 3.75% to 4.00%. When that interest bill and other costs exceed the Reserve Banks' earnings, the gap is booked as a deferred asset, $232.5 billion on October 28, 2026. How Fed rate decisions affect T-bill rates follows the policy rate into bill yields, and today's T-bill rates and the Treasury bill calculator show what bills pay.
Where do you see QE and QT in Fed releases?
Balance sheet decisions and data appear in three regular publications.
- FOMC statements and implementation notes, after each of the eight scheduled meetings a year. The note gives the Desk its exact instructions on caps, rollovers and purchases.
- The H.4.1 release, usually each Thursday, with Wednesday levels and weekly averages for every Fed asset and liability.
- The New York Fed's monthly purchase schedule, released around the ninth business day of each month.
How is QE different from rate cuts and bill purchases?
QE, QT, reserve management purchases and rate changes all appear in Fed announcements, but they work on different parts of the yield curve.
| Tool | What the Fed does | Aimed at | Balance sheet |
|---|---|---|---|
| Quantitative easing | Buys longer-term Treasuries and MBS in bulk | Long-term yields | Grows fast |
| Quantitative tightening | Lets bonds mature unreplaced, up to caps | Holdings no larger than ample reserves need | Shrinks |
| Reserve management purchases | Buys bills, or notes with 3 years or less left | Reserves ample enough for rate control | Grows slowly |
| Maturity extension, 2011 to 2012 | Bought 6- to 30-year Treasuries and sold an equal par amount maturing within 3 years | Long-term yields | Unchanged |
| Rate change | Moves the federal funds target range | Short-term rates | Unchanged |
Perli said in March 2026 that reserve management purchases "do not represent a change in the stance of monetary policy" and should not be confused with the crisis and pandemic programs. The FOMC called its October 2019 bill purchases "purely technical measures" on the same grounds.
What do people get wrong about QE?
Most misreadings mix up what the Fed buys, what its balance sheet shows and what yields do while purchases run.
- Treating any Fed purchase as QE. Bills and reinvested MBS principal take little duration out of the market, and removing duration is how QE pushes long yields down.
- Expecting yields to fall while purchases run. The 10-year yield climbed from 0.52% on August 4, 2020, the lowest daily reading since the series began in 1962, to 1.85% on January 26, 2022, while the pandemic round was still buying.
- Equating a bigger balance sheet with more reserves. Reserves peaked in December 2021, four months before total assets, and were $3.82 trillion by April 13, 2022, as the Treasury's account at the Fed rose from $115 billion to $547 billion and reverse repos from $1.79 trillion to $2.07 trillion.