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The reduction in the size of a central bank's (especially the US Federal Reserve Bank or the "Fed") balance sheet in order to control inflationary pressures. By April 2022 the monetary policy committee (MPC) was becoming alarmed at the rate at which inflation was increasing in the US economy. They began raising interest rates and the minutes released after the April MPC meeting showed that Fed officials "generally agreed" to cut up to $95 billion a month from the central bank's asset holdings. This process is known as quantitative tightening (Q/T) and is designed to reduce the size of the money supply thereby cooling economic growth and reducing inflationary pressures. Clearly, Q/T is bad for share prices, especially when accompanied by rising interest rates. By the end of July 2023 the Fed had tightened rates 11 times by a total of 5,25% and steadily reduced the size of their balance sheet through Q/T. By July 2024 it was apparent that the higher level of interest rates was having the desired effect and inflation was coming down steadily. At its meeting in September 2024, the Fed cut interest rates by 50 basis points and indicated that Q/T would continue at the rate of $60bn per month ($25bn in Treasury securities and $35bn in government-backed mortgage securities).

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