Quantitative Query

Under normal conditions central banks alter short-term interest to change economic activity. During the Great Recession, short-term rates hit zero so the Fed began to reduce long-term interest rates via quantitative easing (QE). QE works in two ways. By driving down long-term rates, QE pushes up asset prices (stocks, bonds) thus boosting spending. And, by telling the market that rates will stay down a long time, it increases risk taking.