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What is quantitative tightening?

  • Management Dictionary
  • Corporate and Market Finance
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Quantitative tightening is a strategy used by central banks to deliberately reduce liquidity in the financial system. It is carried out by selling government securities, which decreases banks’ excess reserves and reduces the overall money supply.

This can help fight inflation by increasing interest rates, affect asset prices by potentially triggering corrections in stock and real estate markets, influence exchange rates by strengthening the domestic currency, and allow the central bank to reduce the size of its balance sheet.

https://www.youtube.com/watch?v=YiMOZ4hZBt0
https://www.youtube.com/watch?v=fI2Mb8LfLf4
https://www.youtube.com/watch?v=ZX8pvKPXrBg
Keywords
  • bonds, central banks, financial markets, monetary policy

Author(s)

BESANGER Serge

Professeur

INSEEC-U

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Corporate and Market Finance

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