Quantitative tightening

Quantitative tightening is a monetary policy measure to wipe out excess reserves from a monetary system through the sale of assets a central bank holds on the asset side of its balance sheet. It aims to undo Quantitative Easing, it takes place with rising interest rates, and its final purpose is to keep inflation under control. The removal of excess reserves affects the way in which a central bank conducts its monetary policy: either in a floor or a corridor system. Contrary to Quantitative Easing, it is implemented with caution because it can cause problems of financial instability if some banks need relatively large amounts of reserves when the central bank withdraws them.