Question

As a monetary policy how has Quantitative Easing (QE) been an 'unconventional tools?'

Answer 1

Quantitative easing is one form of tool of monetary policy used by the central bank to increase the growth in the economy.

Quantitative easing is called as unconventional method because here the central bank creates money and than buy government debt from commercial banks. All this will help the central bank to increase the bond prices and reduce the interest rates in the market to boost the spending in the economy and allowing business to take more loans. Sometimes to boost the economy in Quantity easing the central bank lower the interest rate below the negative value. This method is called unconventional because they want to boost the growth in the economy but due to using this Quantitative easing the inflation rate will go up which leads the country to see high inflation rate. So central bank has to monitor too see that inflation rate does not go up. Thus Quantitative easing is called as an unconventional monetary tool.