ACTV - How The Fed Uses Quantitative Tightening To Address Inflation
2024-05-15 02:10:00 ET
Summary
- In June 2022, the Federal Reserve began its program of quantitative tightening (QT) as a complementary policy to conventional interest rate hikes.
- On May 1, Fed Chairman Jerome Powell announced an important change to the program that seemed to attract little attention outside the world of financial markets but could signal a major policy pivot.
- The Federal Reserve’s path of QT over the last two years was to allow $35 billion in bonds to “roll off” each month.
By Jim Iuorio
At a glance
- The quantitative easing policy that began in 2020 has transformed into a quantitative tightening policy as the Federal Reserve looks to combat demand-driven inflation.
- The Fed recently reduced the amount of bonds they were allowing to roll off their balance sheet from $35 billion to $25 billion per month.