The Federal Reserve's recent policy decision kept interest rates unchanged, continuing since July 2023. However, it announced a significant reduction in its quantitative tightening (QT) program, starting in June.
QT involves selling off assets to decrease money supply and raise interest rates. This move follows massive bond purchases during the pandemic, which suppressed interest rates. While QT can help control inflation, it also reduces liquidity in the economy and can lead to higher interest rates and tighter monetary conditions.
The Fed aims to avoid a repeat of the 2019 "repo crisis" caused by QT, and plans to scale back QT to...
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