Quantitative tightening is a monetary policy tool employed by central banks to reduce the size of their balance sheets. This process involves allowing assets, such as government bonds or mortgage-backed securities, to mature without reinvesting the proceeds, thereby decreasing the money supply. The objective is typically to combat inflation and normalize monetary conditions. It represents a reversal of quantitative easing policies.
Context
Quantitative tightening is a significant factor influencing macroeconomic conditions and, by extension, the performance of various asset classes, including digital assets. News reports often analyze the pace and impact of central bank balance sheet reduction on market liquidity and investor risk appetite. The potential effects on interest rates and capital flows are closely monitored by market participants.
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