...QE Can Reduce Ratings Risk: A credible and effective quantitative easing (QE) programme can provide support to sovereign ratings through various channels and potentially reduce the risk of downgrades, relative to the counter-factual of no action. The ability to implement QE without triggering serious financial disorder increases authorities' policy flexibility once the "zero lower bound" of interest rates is reached or approached. QE may also support sovereign funding flexibility in the short to medium term. Support to Public Finances: By reducing the risk of prolonged deflation and recession, QE can mitigate deterioration in budget deficits and government debt/GDP ratio. Profits on central bank (CB) asset purchases are often passed on to governments in the form of dividends, further reducing budget deficits. QE also increases the financing flexibility of sovereigns by reducing the net financing requirement from the private sector, as sovereign bonds are the most typical assets purchased...
