Federal Reserve and Central Banks Discuss Quantitative Tightening

The Federal Reserve and other central banks are reviewing the impact of quantitative tightening (QT) that is unwinding the large asset purchase operations they carried out. A new study provides international evidence on how QT works, revealing that it has been relatively smooth and has had minimal impact on market functioning and liquidity. The path forward may not be as smooth due to elevated government debt issuance, but the evidence suggests that central banks should be more comfortable shrinking their balance sheets in the future.