On 18 March 2009, the Federal Reserve said it would buy up to $300 billion of US government bonds over six months. The yield on 10-year government bonds, the yearly return a buyer earns at today's price, fell from 3.02% to 2.51% that day. In the Fed's daily data since 1962, it was the largest one-day fall since October 1987.
That purchase was part of the first round of Quantitative Easing (QE). The Fed's balance sheet is everything it owns, reported as total assets. Over four rounds of QE, it grew more than tenfold. Here is what QE is, how it works, what each round did and what can go wrong.
What is Quantitative Easing? Quantitative Easing (QE) is a central bank creating new money to buy bonds in large amounts. It aims to push down long-term interest rates when the overnight rate it sets is already near zero.
The Fed ran four rounds. QE1 began in November 2008, QE2 in November 2010, QE3 in September 2012 and the 2020 round in March 2020.
The Fed's balance sheet, its total assets, peaked at $8.97 trillion in April 2022. It was $6.74 trillion on 30 September 2026.
A New York Fed study looked at eight QE1 announcement days. Across them, the 10-year US government bond yield fell by a combined 0.91 percentage points. 18 March 2009 had the largest fall.
What QE is
The Fed's usual tool is the Federal Funds Rate, the rate banks charge each other to borrow overnight. We explain it in What Is the Fed Funds Rate? In December 2008, the Fed cut its target for that rate to a range of 0% to 0.25%. It could not cut much further.
So it began to buy two kinds of long-term bond in large amounts:
Treasuries: bonds issued by the US government.
Mortgage-backed securities (MBS): bonds built from bundles of home loans, guaranteed by the housing agencies Fannie Mae, Freddie Mac and Ginnie Mae.
The aim is lower long-term interest rates, which feed into mortgages and company borrowing. When the Fed buys a large share of the long-term bonds on offer, their prices rise. Higher prices mean lower yields, as we show in Bond Prices and Yields.
The Fed's balance sheet since 2007
Source: FRED (WALCL, TREAST, WSHOMCB); YX Insights
The chart shows the Fed's total assets by type, with the four QE rounds shaded. Total assets were $875 billion in January 2007. They peaked at $8.97 trillion in April 2022.
The first jump, in late 2008, was mostly emergency loans to banks and markets, shown in grey. QE then replaced those loans with bonds.
Twice, the Fed has shrunk its holdings by letting bonds mature without replacing them. This is Quantitative Tightening (QT). It ran from October 2017 to August 2019, then from June 2022 to 1 December 2025. Total assets hit a low of $6.54 trillion on 3 December 2025. On 30 September 2026, they were $6.74 trillion.
How QE works: reserves, deposits and who sells the bonds
The Fed does not print banknotes to pay for its bonds. It creates new money in electronic form, called reserves: money that banks hold in their own accounts at the Fed. Only banks can hold them.
The Fed buys from primary dealers, a group of large banks and securities firms that trade directly with it. The Bank of England, which also runs QE, says it buys mainly from firms such as pension funds and insurers. When a pension fund sells, its bank adds new deposits to the fund's account. The central bank pays that bank in new reserves.
Reserves grew from $9.8 billion in August 2008 to a peak of $4.28 trillion in December 2021. They were $2.95 trillion on 30 September 2026. Reserves can fall while the balance sheet grows, as the last section shows. The Fed pays interest on them, as we explain in How the Fed Sets Rates.
Since December 2025, the Fed has bought Treasury bills, US government debt of a year or less. It calls these reserve management purchases. Their aim is enough reserves in the banking system. Then-Chair Jerome Powell called them "completely separate from monetary policy". In the Fed's framing, they are not QE.
The four rounds of QE, 2008 to 2022
The table lists what the Fed announced. The chart shows how much its bond holdings rose.
Round | Announced | What the Fed said it would buy | Purchases ended |
|---|---|---|---|
QE1 | 25 November 2008, expanded 18 March 2009 | $1.25 trillion of MBS, about $175 billion of housing agency debt and $300 billion of Treasuries | March 2010 |
QE2 | 3 November 2010 | $600 billion of Treasuries, about $75 billion a month | June 2011 |
QE3 | 13 September 2012, expanded 12 December 2012 | $40 billion of MBS a month, plus $45 billion of Treasuries a month from January 2013, with no fixed end | October 2014 |
2020 round | 15 March 2020 | At least $500 billion of Treasuries and $200 billion of MBS, then "in the amounts needed"; from December 2020, at least $120 billion a month | March 2022 |
Source: Federal Reserve
Source: FRED (WSHOSHO); YX Insights
QE1 added $1.53 trillion from 26 November 2008 to 31 March 2010, including debt issued by the housing agencies. That is less than the $1.73 trillion it bought. The chart counts bonds only once delivered, while mortgage bonds can take months to settle. Repaid home loans also shrink them. QE2 added $0.60 trillion.
QE3 added $1.64 trillion. It had no fixed size or end date.
The 2020 round was the largest. Holdings rose by $4.55 trillion in two years. It began in March 2020 to "support the smooth functioning of markets for Treasury securities and agency mortgage-backed securities". From December 2020, the Fed committed to at least $120 billion a month, until it began to slow in November 2021.
What QE did to bond yields
Event study. In a New York Fed staff report, Joseph Gagnon and three colleagues looked at eight QE1 announcements in 2008 and 2009. Across those days, the 10-year Treasury yield fell by a combined 0.91 percentage points. The largest fall came on 18 March 2009. Yields on agency MBS fell 1.13 percentage points.
A wider review. In 2012, then-Chair Ben Bernanke summed up the studies. QE1 lowered 10-year yields by 0.40 to 1.10 percentage points. QE2 lowered them by a further 0.15 to 0.45 percentage points.
These are estimates. Event studies capture only the days around each announcement.
What can go wrong with QE
In the same speech, Bernanke listed the costs:
Inflation. A larger balance sheet could shake confidence that the Fed can exit in time, unsettling inflation expectations. After the 2008 crisis, the balance sheet more than quadrupled by the end of 2014. From 2009 to 2019, inflation on the Consumer Price Index (CPI) averaged 1.6%. After the 2020 round, CPI inflation peaked at 9.1% in June 2022. These figures alone do not show the cause. We test the link in Does Money Printing Cause Inflation?
Financial stability. Lower yields can draw money into riskier assets. Bernanke called this an "imprudent reach for yield".
Losses for the Fed. From September 2022, the interest the Fed paid out, mainly on reserves, cost more than its bonds earned. The Fed records the running total as a "deferred asset": an amount it must earn back before it sends profits to the US Treasury again. The total peaked at $245.9 billion in January 2026. It was $233.1 billion on 30 September 2026, as earnings have again exceeded costs.
How to track QE in the weekly H.4.1 release
The Fed publishes its balance sheet, called H.4.1, every week, usually on Thursday at about 4:30pm Eastern time. Three lines carry most of the story:
Total assets. The headline size of the balance sheet.
US Treasury securities and mortgage-backed securities. These show whether the Fed is buying bonds, holding them or letting them mature without replacing them.
Reserve balances. The money banks hold at the Fed.
Two other lines move reserves. The Overnight Reverse Repo Facility takes cash from money market funds overnight. The Treasury General Account is the US government's own cash account at the Fed. When either one rises, reserves fall.
Quantitative Easing is a central bank creating reserves to buy bonds once its overnight rate is near zero. The Fed used it four times from 2008 to 2022. The studies suggest it lowered long-term yields. It also left the Fed with a larger balance sheet and losses it is still earning back.
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