Quantitative Easing (QE) is an unconventional monetary strategy where a central bank purchases large volumes of long-term sovereign bonds and private assets from commercial entities to expand the monetary base.

When the open market trading desk executes a QE asset purchase, it acquires securities from institutional investors, paying for them by creating new digital bank reserves on the asset ledger:

Central Bank acquires bond from Primary Dealer -> Creates new digital reserves -> Injects funds into Bank Alpha Reserve Account

This process expands the asset side of the central bank’s balance sheet while increasing digital reserves on the liability side, lowering long-term bond yields and injecting liquid capital into the financial system to stimulate lending and economic activity.