Once Bank Rate is near zero, the usual tool has run out

In normal times a central bank loosens policy by cutting its short-term interest rate, which pulls other interest rates down with it. In 2008 and 2009 central banks cut their rates almost to zero while economies were still deep in recession. A nominal interest rate cannot usefully be pushed much below zero, so a further cut was no longer available. The UK remit for the Monetary Policy Committee allows for this: when Bank Rate approaches its effective lower bound, the Committee may use unconventional instruments instead.

The Bank creates money and uses it to buy long-term bonds

A central bank has the power to create money. It pays for bonds by crediting the sellers' banks with new reserves, which takes a few clicks on a computer rather than a printing press. Quantitative easing differs from ordinary operations in what is bought: long-term government bonds, which in the UK are gilts, and in some countries private securities too, rather than short-term bills. The Bank of England and the Treasury set up the Asset Purchase Facility for these purchases in 2009.