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DID YOU KNOW? QUANTITATIVE TIGHTENING

Quantitative tightening (QT) monetary policy is the reverse of quantitative easing (QE). Through QE, central banks create money to buy financial assets, principally bonds, to suppress interest rates in the economy. QE is a stimulatory process that injects significant amounts of liquidity into financial markets.

Under QT, central banks allow the accumulated bond holdings to slowly mature and may even sell bonds into the market. It is a contractionary monetary policy aimed at the slow withdrawal of liquidity from the financial system. The objective is to reduce massively swollen central bank balance sheets and allow suppressed interest rates to find their normal levels.

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