quantitative easing Archives - Fairmont Equities

What is quantitative easing?

June 4, 2020 by Lauren Hua

When conventional methods of increasing economic growth has not worked, then central banks may resort to quantitative easing. It is a method of encouraging economic growth by increasing the money supply. Definition Central banks increase the supply of money by buying bonds from banks. To raise money to purchase these bonds they print money. When banks sell bonds to the central bank, they increase cash reserves and this should encourage them to lend out money to businesses and individuals. The …

Reasons why the stock market is going up despite slow growth

October 29, 2019July 17, 2019 by Lauren Hua

Why is the stock market is going up despite slow growth? Share markets at the moment do not seem to make any sense to the average investor. The S&P/ASX 200 has almost hit its highest point since 2007 yet economic growth has been subdued for a while. So why has the stock market been so bullish when the economy has been weak? 1. Low interest rates Investors are looking for asset classes which generate high returns. Low interest rates mean …

Strategies to stimulate the economy

July 11, 2019July 11, 2019 by Lauren Hua

When growth and inflation are at low levels, central banks and governments can use various methods to stimulate the economy to increase inflation, increase spending, and increase employment. Here are some of the strategies that can be undertaken to achieve economy growth. Lowering Interest Rates When the central bank lowers the interest rate, it wants to change the behaviour of borrowers and lenders by making loans cheaper for individuals and businesses. The Reserve Banks of Australia (RBA) has the goal …