Central bank balance-sheet reduction that withdraws liquidity; a contractionary regime that pressures risk assets.
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QT (Quantitative Tightening) is the reverse of QE, where a central bank shrinks its balance sheet by letting bonds mature or selling them, withdrawing liquidity from the system. It tightens financial conditions and removes a key support from risk assets. The pace of QT and its interaction with bank reserves became a closely watched factor in the 2022-24 tightening cycle. See QE and Money Temperature 101.