Quantitative Tightening (QT)

Quantitative Tightening (QT) is when a central bank like the Federal Reserve shrinks its balance sheet by selling bonds or letting them expire without replacement. Think of it as the opposite of quantitative easing—instead of pumping money into the economy, the Fed is removing it. You'll hear about QT during discussions of interest rates and inflation, because it's a tool the Fed uses to cool down an overheating economy. When the Fed does QT, there's less money sloshing around, which can make borrowing more expensive and potentially pressure stock prices. For example, if the Fed lets $10 billion in bonds mature each month without buying new ones, that's QT in action.