With the economy taking a hit due to the coronavirus pandemic, most central banks around the world resorted to enacting various quantitative easing (QE) measures to salvage the situation.
However, leading economies used the measure to pump historic amounts of money into their crashing economies, according to research.
Data acquired by the financial news platform Finance in Bold Finbold, between January 2020 and November 2021, showed that four major central banks expanded their QE programmes by a total of $9 trln to support their economies. The U.S. Federal Reserve and the European Central Bank each accounted for $3.4 trln during the period. The Bank of Japan ranks third at $1.6 trln, followed by the Bank of England at $0.6 trln.
Elsewhere, the balance sheet of the Fed , ECB, BoJ and BoE surged 60.13% between 2019 and 2021 from $15.5 trln to $24.5 trln. Over the last eight years, the banks’ lowest cumulative balance sheet was in 2014 at $10.4 trln.
Printing more money
With the monetary policy emerging as a possible cushion to the economy, it has, however, resulted in potential adverse effects, as highlighted by the report.
According to the Finbold research, “printing money has several shortcomings, with inflation remaining the most significant concern, especially if the economic output fails to support demand.
“For instance, the United States is currently grappling with skyrocketing inflation that has hit 6.1%, the highest in almost three decades. Most economists project that inflation will keep soaring due to the monetary policy adopted amid the pandemic.”
Pumping more money into the economy amid the pandemic was considered a last resort measure because the countries risked further crashes. Most central banks decided on the amount to inject into the economy based on factors like financial stability, inflation level, stability of the exchange rates, among others.