A central bank's asset portfolio is shown at two different points in time. In Year 1, its assets consisted of: 50% Foreign Currency, 30% Loans to Commercial Banks, and 20% Government Bonds. By Year 5, its portfolio had changed to: 5% Foreign Currency, 5% Loans to Commercial Banks, and 90% Government Bonds. Which of the following central bank actions most likely explains this dramatic shift in asset composition?

A central bank that has recently undertaken a significant quantitative easing program would be expected to show a more diversified asset portfolio, with a smaller percentage of its total assets held in the form of domestic government bonds compared to its pre-program holdings.

Central Bank Balance Sheet Analysis

Explaining Central Bank Asset Shifts