Back to Glossary
General TradingA
Asset Purchases
The act of a central bank buying financial assets from the market, typically government bonds, to increase the money supply and encourage lending and investment. A key tool of quantitative easing, asset purchases lower long-term interest rates and boost asset prices by injecting liquidity into the financial system. The unwinding of these purchases, known as quantitative tightening, can have the opposite effect on markets.
Example
“The Federal Reserve's asset purchases helped stabilize the bond market during the crisis, keeping borrowing costs low for businesses and consumers.”