When a central bank, such as the Bank of England, implements quantitative tightening (QT) as part of a contractionary monetary policy stance, it:
sells government bonds to the financial sector, which reduces commercial bank reserves and places upward pressure on bond yields.
purchases government bonds from the financial sector to increase commercial bank reserves and place upward pressure on bond yields.
sells government bonds to the financial sector to increase commercial bank reserves and place downward pressure on bond yields.
lowers the reserve requirement ratio for commercial banks to restrict their capacity to extend credit to the wider economy.
