Quantitative tightening

Quantitative tightening (QT) is a contractionary monetary policy tool applied by central banks to decrease the amount of liquidity or money supply in the economy.

For example, to fight with ultra-low inflation or deflation caused by the economic crisis, the European Central Bank, overseeing monetary policy for countries that use the euro, introduced negative rates in 2014.

In 2019, less than a year after initiating QT, central banks, including the Federal Reserve, ended quantitative tightening due to negative market conditions occurring soon after.

[10] In 2023, the European Central Bank (ECB) accelerated its quantitative tightening process by deciding to stop renewing maturing government bonds, except for those included in the Pandemic Emergency Purchase Programme (PEPP), which will be reinvested until 2024.

[11] The ECB's actions are part of a broader strategy to reduce inflation and normalize interest rates in the eurozone after a prolonged period of quantitative easing.