A Timeline of Quantitative Easing

2001-2006: The Bank of Japan Goes First

Japan reached the practical floor for interest rates years before anyone else. After the asset bubble of the late 1980s collapsed, the Bank of Japan cut its policy rate essentially to zero by the end of the 1990s and still faced falling prices. In March 2001 it adopted an explicit policy of expanding the quantity of reserves in the banking system rather than targeting an interest rate — the first modern quantitative easing programme, a term the economist Richard Werner had introduced in the Japanese debate in the mid-1990s. The programme ran until 2006. Western economists watched closely, and the Japanese experience became the central case study in what a central bank can do once conventional rate cuts are exhausted.

2008-2010: The Fed's First Purchases

By December 2008 the FOMC had cut its target range to zero to 0.25 percent and had no conventional room left. In late November 2008 the Fed had already announced purchases of agency debt and mortgage-backed securities to unfreeze the housing finance market, and in March 2009 it expanded the programme to include hundreds of billions of dollars of longer-term Treasury securities. This became known as QE1. The stated aim was not to hit a reserves target, as in Japan, but to push down long-term interest rates and improve conditions in specific credit markets — Ben Bernanke preferred the term credit easing. A second programme, QE2, was announced in November 2010 and concentrated on longer-term Treasuries.

2011-2014: Operation Twist, QE3, and the Taper

In September 2011 the Fed launched a maturity extension programme, popularly called Operation Twist after a similar 1961 operation, selling short-dated Treasuries and buying long-dated ones to flatten the yield curve without expanding the balance sheet. In September 2012 the committee announced QE3, which broke with precedent by being open-ended: purchases at a stated monthly pace that would continue until the labour market improved substantially. In May 2013, remarks about eventually slowing purchases triggered a sharp bond sell-off that markets named the taper tantrum. Tapering was formally announced in December 2013 and the purchases ended in October 2014, by which point the balance sheet had grown from under one trillion dollars before the crisis to roughly four and a half trillion.

2017-2019: The First Attempt at Unwinding

For three years after purchases stopped, the Fed reinvested maturing securities to hold the balance sheet steady. In October 2017, under Janet Yellen, it began the first quantitative tightening in its history, allowing a capped amount of maturing securities to roll off each month without reinvestment and letting the balance sheet shrink passively. The programme was deliberately dull — Yellen described the intention as making it as boring as watching paint dry — but by September 2019 strains in short-term funding markets showed that bank reserves had been drawn down further than expected. The Fed resumed purchasing Treasury bills to rebuild reserve balances, an operation it was careful to distinguish from quantitative easing.

2020-2022: The Pandemic Programme and Its Reversal

In March 2020 the Treasury market itself seized up as investors rushed for cash. The Fed cut to near zero and announced enormous purchases of Treasuries and mortgage-backed securities, which within days it made open-ended, committing to buy in whatever amounts were needed to keep markets functioning. The programme was initially framed as restoring market function rather than as stimulus, though it soon served both purposes. Purchases were tapered from late 2021 and ended in March 2022, with the balance sheet near nine trillion dollars. A second round of quantitative tightening began in June 2022, again through capped monthly runoff rather than outright sales of securities.