Balance Sheet & Liquidity
Can quantitative easing happen with positive interest rates?
Quantitative easing changes the composition of private-sector balance sheets by exchanging longer-duration securities for central-bank reserves. The purchases can compress term premia, improve market functioning and reinforce expectations that policy will remain accommodative.
How to read it
Its market effect is therefore broader than the mechanical quantity of bonds purchased; expectations and scarcity of duration matter as well.
Watch the policy-rate path, front-end OIS pricing, the 2s10s or equivalent curve shape, inflation expectations and the central bank’s own communication. Together they show whether markets are repricing the current decision, the next cycle, or the credibility of the framework.
Central-bank effects are regime-dependent. The same policy action can produce different market outcomes when inflation, growth, positioning or prior expectations differ.