Quantitative tightening (QT) is a monetary policy tool used by central banks to reduce an economy's money supply, liquidity, and overall level of economic activity.
QT implementation necessitates a delicate balance between removing money from the system and not destabilising financial markets. Central banks run the risk of removing liquidity too quickly, which can frighten financial markets, resulting in erratic bond or stock market movements. This is exactly what happened in 2013 when Federal Reserve Chairman Ben Bernanke simply mentioned the possibility of slowing asset purchases in the future, causing a massive spike in treasury yields and sending bond prices lower.

Quantitative tightening (QT) is a monetary policy used by central banks to reduce the amount of money circulating in the economy. This is achieved by decreasing the central bank's balance sheet, primarily by selling government bonds and other securities or by letting these assets mature without reinvestment. The goal of QT is to counteract inflationary pressures by making borrowing more expensive and reducing excess liquidity. This contrasts with quantitative easing (QE), where central banks purchase securities to inject money into the economy and stimulate growth. QT can lead to higher interest rates, slower economic growth, and reduced asset prices. Central banks employ QT cautiously to avoid triggering economic instability or excessively tightening financial conditions.