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69 sats \ 0 replies \ @anon 7 Dec \ on: Reserve Bank of India Liquidity Injection econ
Short answer: yes, although quantitative easing can be achieved in a number of different ways.
- Reduced repo rate: This makes it easier for banks to borrow money from the central bank in order to balance their books. These overnight loans are collateralized by securities (eg treasury bonds) that the banks own. When the central bank “buys” this government debt it’s increasing the amount of currency that the banks can lend to each other.
- Open market operations: the central bank indirectly buys treasury bonds from the government. This gives the government more money for spending and effectively creates new currency units that go to the banks that buy treasury bonds from the government and the banks that store the governments money.
Mike Maloney’s Hidden Secrets of Money documentary series has a nice animation that explain how the US central bank interacts with the treasury and private banks.
https://www.stlouisfed.org/open-vault/2019/august/open-market-operations-monetary-policy-tools-explained