Quantitative Tightening The Opposite Of Qe

QE has spiked the last couple years because of the Fed's response to COVID. While QE increases the balance sheet of the Federal Reserve, what happens when the balance sheet decreases? That's where Quantitative Tightening comes in.

QT occurs when the Fed reinvents less money into assets than it receives in coupon payments from bonds. This lack of reinvestment from the Fed causes the money supply to decrease. QT is usually used to decrease the inflation rate within a country. Because of the Fed's goal of 2% inflation over time, QE is used much more often than QT.

We can only speculate when QT will be used again, as QE seems to be main option for the Fed since COVID.

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