Does the Federal Reserve (or any other central bank in any other country) have the power to buy municipal bonds through quantitative easing? If it does, where would I find out how much?

1 Answer 1


Quantitative easing is a general term that just refers to when a central bank decides to purchase financial assets from non-governmental institutions, as opposed to the usual policy of buying and selling government debt securities. Quantitative easing doesn't impose any legal framework on central banks that forbids them from buying municipal bonds; it's just a term that applies to a very general class of actions.

In the case of the Federal Reserve, the Federal Open Market Committee and the Board of Governors would need to approve any changes to the current round of easing or the start of another round that focused on munis. In the current QE round (QE 3), the Fed is purchasing mortgage-backed securities and long-term Treasury securities, not munis. Some commentators have suggested that the Federal Reserve begin purchasing munis, but I've never seen any of the FOMC minutes indicate that they're considering it.

I don't know of any central bank that has bought bonds of local or state/provincial governments as part of a QE round (or any other monetary policy action, for that matter). The European Central bank focused its asset purchases on corporate debt, and the Bank of Japan focused on government debt (I believe). The Bank of England bought gilts, which are government debt, and some private debt as well.

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