Credit Easing

  

Categories: Banking, Econ, Tax

When there’s a fire in your apartment building, you break the glass and pull the alarm. If you’re the head of a central bank, your "break the glass" solution in the event of a fire is called credit easing.

In the event of a financial downturn or economic crisis, a central bank’s goal is to use monetary policy to increase credit access across the economy.

They want people to borrow, so they purchase financial assets like mortgage securities in order to give banks and other institutions money. The expectation is that these firms will turn around and loan that money to consumers and businesses.

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