How Quantitative Easing is Implemented - Key Concept

How is quantitative easing implemented? The Federal Reserve conducts open market operations, buying bonds from the public in the nation’s bond market. The Fed pays for these bonds simply by crediting the reserve balances of the sellers' banks. Although many people refer to this process as "the Fed printing money", the Fed’s purchase of bonds is just a bookkeeping entry between the Fed and the sellers' banks. This increases total reserves and the amount of money in circulation. When the bond sellers receive the money from the Fed they keep some of the money as currency and some of the money is deposited in their bank accounts. Banks then lend this money to businesses and consumers. The economy’s money supply increases, and interest rates decline making it easier for the economy to expand.