•  Another important channel is the signalling effect whereby the central bank’s balance sheet expansion signals a turn towards an accommodative monetary policy stance over an extended horizon and pushes back the date on which a policy rate hike is expected.
By introducing a QE programme, a central bank can send a strong signal that it will continue to be able to loosen monetary policy and stimulate demand even when monetary policy rates hit a lower bound, which could have had a strong impact on private sector’s inflation expectations and thereby lower real interest rates, boosting economic activity and inflation.