Glossary · Money and central banks
Quantitative tightening
Quantitative tightening (QT) is QE in reverse: a central bank shrinks the pile of bonds it bought, taking money out of the financial system.
Also called: QT, balance sheet runoff, balance sheet reduction
From April 2022 to December 2025: −27%
November 4, 2026
In plain words
During quantitative easing a central bank buys bonds with newly created money. Quantitative tightening, or QT, undoes it: the central bank lets its pile of bonds shrink, and the money it created disappears with them.
Usually it does not sell anything. Every bond has an end date, its maturity, when the borrower pays it back. During QT, when a bond the central bank owns matures, the government repays it and the central bank simply does not buy a new one. The repayment cancels reserves that QE once created.
Less buying of bonds tends to nudge long-term interest rates up, so QT tightens money a little on top of higher key rates. The Fed’s balance sheet shrank by $2.43T (27%) between April 2022 and December 2025.
Example
One month of runoff
- $60 billion of Treasury notes held by the Fed mature this month.
- The Treasury repays them from its account at the Fed, money it raises by selling new bonds to investors.
- Investors pay for those new bonds from their bank accounts, so banks’ reserves at the Fed fall by $60 billion.
- The Fed does not reinvest. Its balance sheet is $60 billion smaller on both sides: fewer bonds, fewer reserves.
From September 2022 the Fed let up to $95 billion a month run off this way: $60 billion of Treasuries and $35 billion of mortgage bonds.
One level deeper
The Fed has run QT twice. From October 2017 to August 2019 its balance sheet shrank by $700B (16%). Weeks after it stopped, a cash squeeze in the overnight lending market showed that reserves had grown scarce, and the Fed started buying Treasury bills again. The second round began in June 2022, after the post-2020 inflation; the Fed slowed it in 2024 and 2025 and ended it on December 1, 2025.
Why stop at all? QT drains reserves, and banks need a certain amount to make payments and meet the rules; when reserves get scarce, overnight rates jump, as in 2019. So central banks now aim to keep reserves “ample” rather than return to the small balance sheets of before 2008.
The ECB, the Bank of England and others ran their own QT after 2022, and the Bank of England went further than most: besides letting bonds mature, it sold some back to the market. The Eurosystem’s balance sheet went from €8.84T in June 2022 to €5.91T on November 6, 2026, as bonds matured and banks repaid cheap loans.
The Fed’s two rounds of QT
The balance sheet shrank in 2017–2019 and again from mid-2022, after the 2020 surge. The Fed held $6.75T on November 4, 2026, more than a year earlier ($6.59T).
The numbers behind the chart
| Date | Federal Reserve total assets |
|---|---|
| Jan 2017 | $4.45T |
| Dec 2017 | $4.45T |
| Dec 2018 | $4.08T |
| Dec 2019 | $4.12T |
| Dec 2020 | $7.32T |
| Dec 2021 | $8.72T |
| Dec 2022 | $8.57T |
| Dec 2023 | $7.73T |
| Dec 2024 | $6.89T |
| Dec 2025 | $6.57T |
| Nov 2026 | $6.75T |
Why it matters
QT is the second half of QE: how far central banks can shrink decides how much they will own in markets for decades.
It adds to the supply of bonds that private investors must buy, which can push up long-term rates, including mortgage rates.
Done too fast it can squeeze the cash banks need, as in September 2019, so central banks watch money markets closely while it runs.
A common mistake
Myth: Quantitative tightening means the central bank dumps its bonds on the market.
In fact: Mostly it just stops replacing bonds as they mature. The Fed did not sell bonds in either round of QT; they ran off on their own schedule. A few central banks, such as the Bank of England, did sell some.
Questions people ask
What is QT in simple terms?
The central bank’s pile of bonds gets smaller because it does not replace bonds as they are repaid. The money that bought them disappears, so there are fewer reserves in the banking system.
Is the Fed still doing quantitative tightening?
The Fed ended its second round of runoff on December 1, 2025. It held $6.75T on November 4, 2026, more than a year earlier.
Does QT raise interest rates?
A little, mainly long-term ones: with the central bank buying less, private investors must hold more bonds and want a bit more yield. The effect is much smaller and slower than a change in the key rate.
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About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- Eurosystem: total assets: European Central Bank, Eurosystem consolidated weekly financial statement, series ILM.W.U2.C.T000000.Z5.Z01 (ECB Data Portal).
- Federal Reserve: total assets: Board of Governors of the Federal Reserve System, H.4.1 Factors Affecting Reserve Balances, series WALCL; retrieved from FRED, Federal Reserve Bank of St. Louis.
- Gross domestic product (current dollars): U.S. Bureau of Economic Analysis, National Income and Product Accounts, Table 1.1.5, series GDP; retrieved from FRED, Federal Reserve Bank of St. Louis.
- This page explains a term. It is not investment advice.