A monetary policy tool where a central bank reduces its money supply by letting bonds and other assets it owns mature without replacing them. This is the opposite of quantitative easing and is done when the central bank wants to remove money from the economy and slow inflation. Quantitative tightening reduces the amount of cash available for borrowing and spending.
A central bank owns $500 billion in government bonds it bought during a crisis. Instead of buying new bonds when old ones mature, it lets them expire without replacement. Over time, this removes cash from the financial system and makes borrowing harder and more expensive.
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