The presentation includes the basic idea of what Monetary policy is and how many central banks around the world uses it to recover out of recession of 2008.

1. Quantitative Easing
A Monetary Policy Tool
BY:
MOHAMMADALI SURTI
GHPIBM

2. Index
•What is QE?
•How much money is pumped into?
•What is QE1, QE2 and QE3?
•Why QE?
•What is the result?
•What next?
•What is the Impact of QE on the India?
•How Indian Economy is prepared?

3. What is Quantitative Easing?
•Its an Monetary Policy
•It’s a policy implemented by monetary authority of various countries to maintain and change the liquidity in the market.
•By using various tools
•Its Non-Conventional

4. What is Quantitative Easing?
•QE is a monetary policy inwhich central bank increases the supply of money in the economy by purchasing various Government securities or any other marketable security from the market.
•What they will do if they runs out of money?
•Print money

6. MervynKing, Governor of the Bank of England, explains QE

7. How much they pumped in?

8. Why they are doing it?
•To come out of the 2008 credit crisis(recession)
•Banks doesn’t lend
•Consumers doesn’t spend and save
•Producers doesn’t manufacture and retrench

9. QE1, QE2,QE3, operation twist &QE4
•QE1: December 2008 -June 2010
•Purchased MBS that had been originated by Fannie Mae, Freddie Mac, or the Federal Home Loan Banks.
•QE2:.November 2010 -June 2011
•$600 billion of Treasurysecurities. The Fed was actually hoping to spur inflation a bit by increasing the money supply. Expectations of inflation increase demand, which would spur economic growth

10. Did QE worked?
•QE achieved some of its goals:
•It removed toxic subprime mortgages from banks. Balance sheets
•Italso helped to stabilize the U.S. economy, providingthe funds and the confidence to pull out of the recession.
•It kept interest rates low enough to revive the housing market.
•It did stimulate economic growth, although probably not as much as the Fed would have liked.

11. Did QE worked??
•However, it didn't achieve the Fed's goal of making more credit available.
•It gave the money to banks, which basically sat on the funds instead of lending it out.Banks used the funds to triple theirstock prices through dividends and stock buy- backs.Since banks didn't lend out the money, inflation wasn't created in consumer goods. As a result, the Fed's measurement of inflation, the CPI, stayed within the Fed's target.
•QE created anasset bubble, firstin gold andother commodities, and then in stocks, as investors were forced out of bonds.

12. What next and Why?
•The Fed has been cutting its purchase of Treasury and mortgage- backed securities by $10bn a month at each meeting, from a peak of $85bn.
•$25bn in August and September, and a final $15bn tranche in October.
•Annual rate of growth in April, May and June to 4.2 percent
•The unemployment rate has fallen to 6.2 percent from 8.2 percent two years ago.
•Companies are investing, consumers are spending.

13. WhyHewarnedthatIndia“willbetested”bytheCapitaloutflows?

14. QE Tapering and its Effect
•First announced on May 17 and sent tremors through global markets.
•Asian markets were the most affected; India was worst-hit, having come to depend on FII investment.
•Between June and August, FIIs pulled out 230 billion rupees ($3.7 billion) from the stock market, dragging theSensexdown by 10 percent.
•Therupeewas also hit, losing 27 percent in three months and the RBI was forced to take emergency measures to stop and reverse its fall.

15. Its Effect
•Liquidity problems
•Inflation
•Import barriers
•Depreciation of currency

16. India’s Foreign Exchange Reserves USD319.39 billion

17. THANK YOU!!!