From QE to QT: The Policy Framework

Main points

• Quantitative Easing which aimed to transfer duration risk from the market to the government/central bank, was larger in amount and lasted longer than anyone had expected.
• Quantitative Tightening (QT) requires different government/central bank arrangements.
• The eventual budgetary costs of central bank asset purchase programmes will also be one element in any subsequent assessment of the wisdom of such central bank operations and associated Treasury financing.
• QE and the transition to QT could have material consequences for the earnings and balance sheets of banks
• The best-known precedents for monetary policies pursued over such a prolonged period having such a big impact on the balance sheets of governments and of the banks go back many decades.