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Quantitative easing round 3 (QE3)

The U.S. Federal Reserve's 3rd round of stimulus aimed at shoring up the country's economy since the 2007 world financial crisis. It's designed to inject a large amount of extra money into the economy to stimulate the housing and job markets, and to keep long-term interest rates low. Unlike the two previous rounds of stimulus, QE3 remains open for as long as it takes until the economy improves substantially.

Quantitative easing is an unconventional monetary policy used by central banks to stimulate the national economy when conventional monetary policy has become ineffective. A central bank implements quantitative easing by buying financial assets from commercial banks and other private institutions with newly printed money, in order to inject a pre-determined quantity of money into the economy. This is distinguished from the more usual expansion policy of buying or selling government bonds to keep market interest rates at a specified target value. Quantitative easing increases the excess reserves of the banks, and raises the prices of the financial assets bought, which lowers their yield. Quantitative easing of the U.S. dollar has the potential to increase the prices of goods such as oil and other commodities traded in dollars, leading to significant inflation pressure worldwide.

With the QE3, the U.S. Federal Reserve plans to purchase almost $1.5 trillion of debt.

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