Quantitative easing (QE) is a monetary policy used by some central banks to increase the money supply by increasing the excess reserves of the banking system. This is usually accomplished by purchasing the central government's own bonds to stabilize or raise their prices. This results in lower long-term interest rates. This policy is used when other methods to control the money supply have failed.

The first round of QE policy came just after global financial services firm Lehman Brothers Holdings Inc. filed for Chapter 11 bankruptcy protection in September 2008. It first announced a purchase of up to $600 billion in assets in November 2008 and expanded that purchase in March 2009 to $1.7 trillion, aiming to help stabilize the U.S. economy.

On November 3 this year, the U.S. Federal Reserve announced that it will buy $600 billion in Treasury bonds (T-bonds). This move is part of the Federal Reserve's "quantitative easing" (QE2) monetary policy, which is intended to boost the country's sluggish economic growth, according to the Xinhua News Agency.

The Federal Open Market Committee (FOMC), the interest rate policymaking body of the U.S. central bank, said that it will "purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month."

The Fed also decided to keep interest rates at a historically low level of zero to 0.25 percent to stimulate economic recovery.