The Fed can use quantitative easing to stimulate growth once it has lowered the federal funds rate as far as it can go

What is quantitative easing?

Quantitative easing was a relatively new method the Federal Reserve used to curb deflation during the Great Recession. In this process, a central bank digitally creates money that is used to purchase assets, usually government bonds. This lowers returns on low-risk bonds, encouraging investors to put their money in high-risk, short-term stocks, and moves money through the system.

In the aftermath of the 2008 financial crisis, the Fed began a program of quantitative easing

This program injected trillions of dollars of new money into financial markets to stimulate the economy. The move catalyzed an 11-year bull run and was repeated during the pandemic. Experts argue such power could worsen wealth inequality and contribute to bubbles in housing and finance.

During COVID-19, the Fed made drastic moves in attempts to shore up the US economy called quantitative easing

The Fed took an aggressive approach to help the US economy during COVID-19 beyond standard monetary levers, including broad purchases of mortgage-backed securities, Treasury securities, and more.

The Federal Reserve fought the Great Recession primarily with quantitative easing and repurchasing agreements

During the Great Recession, the Fed stimulated the economy by buying people and businesses' debt, notably through purchasing mortgage-backed securities and buying bonds with slim margins. The two processes, quantitative easing and repurchase agreements, both helped increase the amount of money in the economy to increase consumer spending.

The Federal Reserve can set interest rates below zero

Interest rates, the cost of borrowing money, are the primary tool the Federal Reserve uses to control inflation. During periods of deflation, setting interest rates below zero penalizes saving, encourages banks to lend more and moves more cash through the economy.

While the Fed is involved in issuing new generations of cash, the way it adds to the money supply does not involve printers

The majority of money in circulation is credit, not cash. This credit, which acts similarly to direct deposit from employers, is added to bank accounts by the Federal Reserve. The Fed also employs tools like the federal funds rate and open market operations to expand or contract credit.

The Federal Reserve's decisions can impact your money

Car loans, mortgages, business investments—these and more can be drastically impacted by the adjustment of the Federal Reserve’s federal funds rate. Alternatively, savers can earn higher, low-risk yields on their savings when the Fed’s target rate is higher.

Raising interest rates can help control inflation

While controlling a complex and dynamic economy is difficult, interest rates—more specifically, the rate at which banks lend each other money overnight—are a powerful tool. Generally, raising the rate makes purchases more expensive and cools an overheated economy.

The Federal Reserve follows the health of the US economy by tracking the money supply

That includes all of the physical and electronic money in circulation. It tracks not only US coins and bills, but also the money that moves through bank deposits. The Fed uses metrics called trackers to follow different types of transactions through the money supply.

The Fed operates within the open market as a competitive bidder of interest rates

Because it’s viewed as a risk-free platform to earn interest, whatever rate it sets becomes the default benchmark. To maintain its target rate prescribed by the Federal Open Market Committee, the Fed has various tools it offers both commercial banks and home loan institutions.

US inflation can generally be split into to two periods—before and after the Federal Reserve

A central bank itself does not mean significant inflation will occur, but economists generally point to factors like two world wars and the printing of money to finance the US federal deficit as primary drivers of price increases.

Roughly $5T of stimulus money flooded the economy during the pandemic

Recessions can last anywhere from months to years. To encourage economic growth, governments use policy levers such as lowering interest rates or introducing a stimulus. Economists credit massive stimulus funds for helping the economy quickly recover from a recession during the COVID-19 pandemic.

Read former Fed chair Ben Bernanke's 2002 speech about preventing deflation

Very low inflation rates in the early 2000s in the United States and a worsening recession in Japan sparked some domestic concern over the threat of deflation. While Bernanke wasn't Chair at the time of the speech, he emphasized the Fed's role in preventing deflation.

The CME FedWatch Tool predicts the likelihood of future rate changes

It's based on federal fund futures contract prices. At a Fed meeting in July 2024, for instance, Chair Jerome Powell once again decided not to lower rates, though he said cuts could be on the table in September.

Minting a coin that can pay off the federal debt has been proposed as a quick fix to rampant borrowing

It’s uncertain how financial markets would react to such a large cash injection. Some economists warn it could trigger massive inflation. Others say the nation needs a clean slate.

Housing 'starts'— new constructions—signal the health and future of real estate

The Federal Reserve Economic Data, or FRED, tracks monthly “housing starts,” the number of new residential construction projects being built. Some argue this data can serve as an economic barometer.

Treasury bonds, notes, and bills are critical vehicles for the federal government to raise money for public expenses and manage the national debt

For investors, they're all usually considered low-risk options since they’re backed by the federal government.

The central bank was designed to operate free of short-term political influence to prevent the Fed from making disastrous policy decisions

Although the Fed Chair and the six other Governors of the Board are appointed by the US president and approved by Congress, the Fed is not funded by congressional appropriation, and its board members are appointed to lengthy 14-year terms.

Stablecoins could give people in high-inflation economies access to stronger currencies

Specifically, stablecoins could provide a way to make sure these funds remain valuable during times of volatility. Some examples of people without access to the US dollar using stablecoins as a store of value have been observed in Venezuela.

How banking works

To do big things, people often need more money. Banks jumpstart economic activity with loans paid back with interest, and when things are working well, both people and the bank make more money. Formed in the Middle Ages amid competing currencies in Italy, banks—from the Italian for bench, banco—helped stimulate that era's commercial revolution, a massive expansion in Mediterranean trade and development. Find out the ins and outs of banks in this quick explainer video.

Modern Monetary Theory 101

Modern Monetary Theory is a macroeconomic theory that says government spending should not be restrained by fears of rising debt. Here's a breakdown of how the theory works.

How the National Science Foundation supports the US economy

The NSF has filled funding gaps in the research and development of products developed in the private sector, particularly when the research requires more than three years to complete. These investments, including in startups such as Qualcomm and Symantec, have supported job creation, generated economic returns, and helped build the technologies many industries rely upon, such as the internet.

The idea for the Federal Reserve was conceived in secret in 1910—with bankers donning duck hunt gear for disguise while traveling to a remote country club on Georgia's Jekyll Island

Some argue that a massive emergency fund can hurt more than it helps

A financial advisor makes the case for an emergency fund that isn't too overstuffed. An emergency fund that is too large, he argues, can mean that you'll miss other opportunities to grow your wealth.

A short squeeze happens when short sellers increase stock prices by buying shares back quickly

When short sellers realize their positions may be incorrect—usually triggered by increasing share prices—they often try to quickly buy back their shares in order to minimize their total losses. When this happens on a large scale, that buying activity can drastically increase to represent the seemingly high demand for that stock. The result is called a "short squeeze," which refers to short sellers literally being squeezed out of their positions by rising prices.

Since the 1990s, banks have sold some of the credit risk of their accounts to external investors, known as SRTs, or synthetic risk transfers

This means if the account defaults, the outside investors assume most of the risk in return for some regular payments, freeing up the bank's ledger. It is a form of insurance used by banks to allow them to free up capital. In 2024, nearly $100B worth of SRT notes were sold.

While the first exchange-traded fund (a 'basket' of different assets that can be bought and sold on a stock exchange) in the US only launched in 1993, the global ETF market has grown to more than $10T in the short time since.

Hedge funds, the private investment firms that trade a wide swath of financial assets, make money by imposing steep fees on investors and from the fund's investment performance.

The US dollar is the most widely circulated currency in the world, and is involved in nearly 90% of global transactions

Roughly 43 million US borrowers owe roughly $1.7T in student debt, the second-largest source of consumer debt behind mortgages.

Venture capital is a form of funding provided to early-stage companies with high growth potential, typically in exchange for an equity (or ownership) stake

How Amazon operates a 'flywheel' business model, a self-reinforcing cycle that drives continuous growth

The USPS spent $3.97B in 2024, accounting for .058% of the federal budget.

Some coin denominations have ridges etched on their sides, partly to prevent counterfeiting, in a practice called 'reeding.'

The price of gas is a composite made up of several different factors, with the federal gas tax making up less than 20% of what drivers pay at the pump.

Experimental hantavirus vaccines and therapies, still under development, have long been funded by the US military.

The first steps to rebuilding your credit score include getting to know exactly what's on your credit report and figuring out how far you are from the '700 club,' or 'good score' range.

How fusion—which releases energy when two lighter atoms combine to form a heavier atom—differs from fission

Before the current East Wing ballroom project, only two White House renovations in the past 100 years cost more than $10M.

Doctors differentiate between a phobia and fear by asking patients whether their fear interferes with their day-to-day activities.

Telehealth demand for GLP-1s for weight loss is booming as consumers seek easier access.

Gerrymandering works through two techniques: cracking opposing voters across districts to dilute their power, and packing them into a few to waste their votes in lopsided majorities.

Fish populations in the Great Barrier Reef have increased after installing waterproof speakers on the ocean floor that played recordings of sounds from healthy coral reefs.

When a Paris department store hesitated to sell Estée Lauder's perfume, she 'accidentally' broke a bottle, causing the smell to spread throughout the store and shoppers to start asking to buy the scent.

Electrical grids worldwide must double their power delivery capacity by 2050 to meet surging demand from AI and electric vehicles.

Most of the observable universe's volume consists of voids and supervoids—enormous regions of space with little to no galaxies, stars, or light.

Objects can be 3D printed with light by projecting 2D computerized tomography (CT) scans onto rotating cylinders of resin, which solidify upon exposure.

To reduce wrinkles in clothing, research recommends gentle wash cycles with more water and tumble drying with smaller loads and longer times.

Volcanic activity may have triggered the Black Death by spewing gases that led to crop failures in Europe, thus forcing the import of grain ships with plague-infested fleas.

The Beatles' US label rejected the band's first two singles, 'Please Please Me' and 'From Me to You,' with one executive calling the band 'dead in the water.'