SGOV - Where Are The Endpoints Of QT? Ample Reserve System Vs. Demand-Driven Floor System

2025-05-07 11:30:00 ET

Summary

• Quantitative tightening (QT) is concluding in many advanced economies. The central banks are growing confident that reserve levels in their financial systems are nearing their endpoints.
• The US Fed defines the QT endpoint as an “ample reserve level”; in the eurozone and the UK, the goal is to convert their interest rate regimes to a so-called demand-driven floor system.
• Central banks aim to reduce excess liquidity to a point where the reserve demand curves begin to slope upward. However, the different naming of their frameworks reveal subtle transatlantic differences in QT endgames.

Quantitative tightening (QT) - a process central banks use to reverse years of liquidity creation from quantitative easing (QE) - is concluding in many advanced economies. The central banks are growing confident that reserve levels in their financial systems are nearing their endpoints....

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