Definition of credit easing

The practice in which central banks purchase private sector assets with a view to adding liquidity to a troubled market and so easing the flow of credit and lending in the economy.

In 2009, the Federal Reserve undertook credit easing, buying commercial paper and residential mortgage backed securities. The Bank of England and European Central Bank bought corporate bonds. Sometimes the purchases were funded through the creation of money, which links the idea to quantitative easing, sometimes sales of government bills offset funded the purchases, leaving the quantity of money unchanged. 

George Osborne announced a programme of credit easing at the Conservative party conference in October 2011.



Credit easing explained (interactive feature)


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