Quantitative easing: definition

First Branch of the White River, Vermont, Edward Hopper 1938

Willem Hendrik Buiter, Chief Economist at Citigroup, proposed in December 2008 in a post on its Financial Times Blog (he was at that time Professor at the London School of Economics), a terminology to distinguish quantitative easing, or an expansion of a central bank's balance sheet, from what he terms qualitative easing, or the process of a central bank adding riskier assets onto its balance sheet:

Quantitative easing is an increase in the size of the balance sheet of the central bank through an increase in its monetary liabilities (base money), holding constant the composition of its assets. Asset composition can be defined as the proportional shares of the different financial instruments held by the central bank in the total value of its assets. An almost equivalent definition would be that quantitative easing is an increase in the size of the balance sheet of the central bank through an increase in its monetary liabilities that holds constant the (average) liquidity and riskiness of its asset portfolio. Qualitative easing is a shift in the composition of the assets of the central bank towards less liquid and riskier assets, holding constant the size of the balance sheet (and the official policy rate and the rest of the list of usual suspects). The less liquid and more risky assets can be private securities as well as sovereign or sovereign-guaranteed instruments. All forms of risk, including credit risk (default risk) are included.

Quantitative Easing in the press these days

"If the economy performs well in 2013, the Committee will be in a position to think about going on pause" with the asset buys, St. Louis Fed President James Bullard said on CNBC television. "If it doesn't do very well then the balance sheet policy will probably continue into 2014."

Read more: Business Insider Jan 5, 2013

The New York Fed’s primary dealers, the 21 banks with which it carries out transactions, expect quantitative easing to continue until 1Q 2014. This is according to a Dow Jones Business News report.

The primary dealers’ median expectation is that the Fed will continue to purchase $45 billion worth of Treasuries each month throughout 2013, and cut that to $35 billion per month in early 2014.

Read more: Business Insider Jan 4, 2013