Quantitative easing vs tightening

Quantitative easing (QE) and quantitative tightening (QT) are two monetary policy tools used by central banks to influence the economy.

Quantitative easing refers to the process where a central bank buys financial assets from commercial banks to increase the money supply and stimulate economic growth. This results in an increase in bank reserves and lower borrowing costs, encouraging banks to lend more money to businesses and households.

On the other hand, quantitative tightening refers to the process of reducing the money supply in the economy. The central bank does this by selling financial assets or reducing the amount of money it has provided to commercial banks. This leads to a decrease in bank reserves and higher borrowing costs, making it more difficult for businesses and households to obtain credit.

In summary, QE increases the money supply to stimulate economic growth, while QT reduces the money supply to control inflation and stabilize the economy.

Or, put more simply …….