The simple version

Quantitative tightening, usually shortened to QT, is what the Federal Reserve does when it wants to shrink the pile of bonds it has bought. It is the reverse of quantitative easing, or QE, when the Fed buys bonds in large amounts.

The surprising part is how gentle the method is. The Fed mostly does not sell anything. It waits for the bonds it already has to reach their maturity date and get paid off, then chooses not to spend all of that money on new ones. The pile gets smaller by itself, with no sale needed.

The numbers

• In May 2022 the Federal Open Market Committee, or FOMC, said it intended to reduce the Federal Reserve's securities holdings over time in a predictable manner, primarily by adjusting the amounts reinvested of principal payments from the securities it holds (Federal Reserve)
• Balance sheet reduction began in June 2022 (Federal Reserve)
• A Federal Reserve Board staff note describes the ample supply of bank reserves since the global financial crisis as resulting from QE (Federal Reserve Board staff, FEDS Notes)
• Since then, the Fed's total securities holdings declined by more than $2.2 trillion, with redemptions of about $1.6 trillion in Treasury securities and $600 billion in agency mortgage-backed securities (Federal Reserve)
• Over the same period, the Fed's securities holdings fell from 33% to 20% of nominal gross domestic product (Federal Reserve)
• In October and November 2025, runoff was capped at $5 billion a month for Treasury securities and $35 billion a month for agency securities, with principal above those caps reinvested (Federal Reserve, FOMC implementation note)
• On October 29, 2025, the FOMC decided to conclude the reduction of its aggregate securities holdings on December 1, 2025 (Federal Reserve, FOMC statement)
• The Fed said it judged ending the runoff appropriate given the sizable reduction in its balance sheet and money market conditions suggesting reserve levels were approaching the ample level (Federal Reserve)
• From December 1, 2025, principal from maturing Treasury securities is rolled over at auction and principal from agency securities is reinvested into Treasury bills (Federal Reserve, FOMC implementation note)

How letting bonds mature shrinks the Fed's balance sheet

To see QT, first see QE. In quantitative easing, the Fed buys bonds in large amounts, and that buying adds to the money banks keep at the Fed.

QT runs the flow backward. When a bond in the Fed's portfolio matures, the issuer, often the Treasury, pays back the principal. If the Fed does not spend that payment on a new bond, its portfolio gets smaller by that amount, and the money banks keep at the Fed comes down over time. No sale, no announcement per bond, just a steady runoff as bonds come due.

The plan the FOMC laid out in 2022 called for doing this predictably, by adjusting how much of the maturing principal it put back to work, with monthly caps on how much could run off. In the final months those caps were $5 billion a month for Treasury securities and $35 billion for agency securities.

QT has an end point. On October 29, 2025, the FOMC decided to stop the runoff on December 1, 2025, pointing to how far its balance sheet had already shrunk and to conditions in short-term funding markets. Since then, the money from its maturing bonds goes back into new Treasury securities.

What this means

QT and QE are about the size of the Fed's bond holdings, separate from its better-known tool, the interest rate. Knowing QT exists explains headlines about the Fed shrinking its balance sheet that have nothing to do with a rate decision.

The durable point is that the Fed works two levers: the price of money, through interest rates, and the size of its holdings, through buying or shedding bonds. QT is the second lever pulled in the shrinking direction, and the Fed stopped it when it judged reserves were nearing the level it wants to keep.

What this is NOT

This is not advice about investments or any financial decision, it is not a prediction of Federal Reserve policy or interest rates, and it takes no view on whether the policy was right. It explains what quantitative tightening is and how the Federal Reserve carried it out, as the Fed describes it, and treats the end of runoff on December 1, 2025 as past history, not news. Quantitative tightening is the common market name; the Fed's own term is reducing its securities holdings. This is not a political endorsement or criticism of anyone.

Sources

• Federal Reserve, Policy Normalization, read November 13, 2026: https://www.federalreserve.gov/monetarypolicy/policy-normalization.htm
• Federal Reserve, Federal Reserve issues FOMC statement, October 29, 2025, read November 13, 2026: https://www.federalreserve.gov/newsevents/pressreleases/monetary20251029a.htm
• Federal Reserve, Implementation Note issued October 29, 2025, read November 13, 2026: https://www.federalreserve.gov/newsevents/pressreleases/monetary20251029a1.htm
• Federal Reserve Board, FEDS Notes, Annette Vissing-Jorgensen, Fluctuations in the Treasury General Account and their effect on the Fed's balance sheet, August 6, 2025, read November 13, 2026: https://www.federalreserve.gov/econres/notes/feds-notes/fluctuations-in-the-treasury-general-account-and-their-effect-on-the-feds-balance-sheet-20250806.html