Atlas Macro

Central banks

QT (Quantitative Tightening)

Central bank reduction of balance sheet by allowing securities to mature without reinvesting; opposite of QE.

Key points

  • Drains reserves from banking system; tightens financial conditions.
  • Can raise long-end yields and widen spreads.
  • Often paired with rate hikes for "double tightening."

Example

If Fed reduces balance sheet $60B/month and simultaneously hikes rates 25 bps, financial conditions tighten significantly (double hit).

In history

The Fed ran QT from 2017 to 2019 (up to $50 billion a month), ending it in August 2019 after funding markets showed strain. It ran QT again from June 2022 to December 2025.

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