Episode
How Central Banks Use Quantitative Tightening
- Published
- Jun 22, 2026
- Duration seconds
- 686
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Summary
Episode 66 of Monetary Policy Explained with Fexingo dives into quantitative tightening (QT) — the opposite of QE. Lucas and Luna unpack how the Fed reduced its balance sheet from nearly $9 trillion to around $6.5 trillion by June 2026, focusing on the mechanics of letting bonds mature without reinvesting. They discuss why QT started in 2022, how it differs from rate hikes, and the liquidity crunch in September 2019 as a cautionary tale. Specific numbers include the $95 billion monthly cap on Treasury and MBS roll-offs, and the Fed's shift to a slower pace in early 2025. The hosts also explore the risks: reserve scarcity, repo market spikes, and political pressure from Congress. A concrete, historical example — the 2019 repo blow-up — anchors the discussion. The episode closes with a forward look at whether QT can ever be 'routine' or if it always risks breaking something. #QuantitativeTightening #QuantitativeEasing #FederalReserve #BalanceSheet #MonetaryPolicy #LiquidityCrisis #RepoMarket #Treasuries #MBS #Reserves #CentralBanking #Economics #FexingoBusiness #BusinessPodcast #MonetaryPolicyExplained #JeromePowell #LucasAndLuna #Macro Keep every episode free: buymeacoffee.com/fexingo