QE4 was the Federal Reserve’s fourth post-financial-crisis round of quantitative easing: purchases of longer-term U.S. Treasury securities and agency mortgage-backed securities intended to support the economy by keeping financial conditions accommodative. The Fed began the program in January 2013 and concluded new purchases in October 2014. Its potential benefits included lower long-term borrowing costs and support for demand; its risks included inflation, asset-price distortions, and challenges in eventually managing the Fed’s large balance sheet.
What was QE4?
“QE4” is a retrospective shorthand for the Federal Reserve’s fourth round of quantitative easing after the financial crisis. It was a monetary-policy program, not a consumer product or a standalone law. The Fed bought longer-term securities to put downward pressure on longer-term yields and provide monetary accommodation when it wanted to support progress toward maximum employment and price stability.
The Balance dates QE4 from January 2013 to October 2014. The Federal Open Market Committee (FOMC) had set out the purchase approach in December 2012, and in its October 29, 2014 statement it announced that it would conclude the asset-purchase program that month. The Balance’s QE4 overview; December 2012 FOMC minutes; October 2014 FOMC statement.
How did QE4 work?
The securities and purchase pace
In December 2012, the FOMC agreed to continue purchases of longer-term Treasury securities alongside ongoing purchases of agency mortgage-backed securities (MBS). The minutes recorded that primary dealers expected purchases of longer-term securities after year-end to continue at about $85 billion per month. That figure describes a contemporary expectation, not a claim that the same monthly pace or mix of securities remained unchanged throughout QE4.
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When the Fed buys longer-term securities, it adds demand for them. That can raise their prices and lower their yields. Lower yields may, in turn, ease borrowing conditions across parts of the economy. The effect on any particular interest rate depends on broader market conditions as well as the Fed’s purchases.
The intended path from yields to economic activity
- Purchases support demand for longer-term securities. The intended effect is downward pressure on longer-term yields.
- Financial conditions may become more accommodative. Lower market yields can feed through to some mortgage rates and other borrowing costs, though rates do not move one-for-one with Treasury yields.
- Cheaper financing may support spending and investment. Households may find refinancing or borrowing more affordable, while businesses may face lower financing costs.
- Stronger demand may support output and employment. This is the policy rationale, not proof that QE4 alone caused a particular change in growth or jobs.
The Fed’s October 2014 statement said that its sizable holdings of longer-term securities were expected to help maintain accommodative financial conditions. It also said the labor-market outlook had improved substantially since the asset-purchase program began and that the underlying strength of the economy was sufficient for continued progress toward maximum employment and price stability.
When did QE4 end, and what happened afterward?
On October 29, 2014, the FOMC stated: “Accordingly, the Committee decided to conclude its asset purchase program this month.” Ending new purchases did not mean the Fed immediately shed the securities it already held. The Committee said it would continue reinvesting principal payments from agency debt and agency MBS into agency MBS, and would roll over maturing Treasury securities at auction. Those steps were intended to maintain sizable holdings and support accommodative financial conditions.
What were the potential benefits of QE4?
The main prospective benefit was easier financial conditions during a period when the Fed sought further progress toward its employment and price-stability goals. The possible effects below are transmission channels, not guaranteed results or outcomes attributable to QE4 alone.
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- Lower longer-term yields: Additional demand for longer-term securities can put downward pressure on their yields, which may influence other longer-term borrowing rates.
- More affordable mortgage financing: Lower mortgage rates can make refinancing or home purchases more affordable for some borrowers, depending on credit access and other market conditions.
- Support for household and business spending: Lower financing costs may encourage borrowing, consumption, or investment, potentially supporting economic activity.
- Support for employment through demand: If easier financial conditions lead to stronger demand and production, they may help support hiring. The Fed identified labor-market progress as part of its policy objective, but that does not establish how much of any employment change QE4 caused.
The Balance also discusses housing, stock prices, exports, and credit as possible areas affected by the policy. These outcomes depend on many forces beyond asset purchases, so they should be understood as potential channels or debated effects rather than assured benefits.
What were the risks and disadvantages?
- Inflation risk: Monetary accommodation can raise demand and, if demand grows faster than the economy’s capacity to supply goods and services, contribute to upward pressure on prices. That was a risk to consider, not an outcome established for QE4: the Fed reported in October 2014 that inflation was running below its longer-run objective.
- Asset-price and distributional effects: Lower yields can make higher-yielding assets more attractive, potentially influencing their prices. The gains and costs may be unevenly distributed among households, depending on what they own, owe, and earn. The cited Fed statements establish the policy design and rationale, not the size or distribution of these effects.
- Exit and balance-sheet management: Ending purchases is different from reducing the securities already held. The Fed continued reinvestments and Treasury rollovers after October 2014, illustrating that managing the stock of assets was a separate policy issue from stopping new purchases.
- Limits to causal claims: Employment, inflation, housing, exchange rates, and equity markets respond to many influences. The policy rationale explains how QE4 could affect financial conditions; it does not show that QE4 alone produced any particular observed outcome.
The Balance also lists the end of Operation Twist among QE4’s disadvantages. The key distinction for readers is that the transition away from one policy approach and the risks of managing asset holdings are not, by themselves, proof of a specific harm caused by QE4.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What can—and cannot—be concluded about QE4?
The official record establishes the Fed’s intended goals, the broad securities it purchased, the expected purchase pace reported in December 2012, and the October 2014 decision to end new purchases while maintaining sizable holdings through reinvestment and rollovers. It also supports the explanation of how purchases were intended to ease financial conditions. Establishing how much QE4 changed inflation, employment, home prices, stock prices, or inequality requires empirical evidence designed to separate its effects from other economic forces.
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