Central bank tightening: what could break?
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QT in Europe
Constancio is worried about the potential effects of quantitative tightening or QT policies which shrink central bank's balance sheets. In Europe, there is now an episode related to long-term central bank liquidity that has been supplied to euro-berry banks. There are 1.2 trillion of those things that mature in June of next year and would be a very sizable reduction of the ECB's balance sheet without having to embark formally into QT.
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