Central banks' quantitative tightening $2T over next 2 years: Fitch

ISTANBUL

Central banks' quantitative tightening is expected to total $2 trillion over the next two years, according to Fitch Ratings on Thursday.

Combined asset purchases of the US Federal Reserve, the European Central Bank (ECB), the Bank of England (BoE), and the Bank of Japan "will be negative to the tune of $1 trillion in both 2023 and 2024," the global rating agency said in a statement.

Quantitative tightening, which decreases the amount of liquidity and money supply by central banks, will raise the supply of government bonds that markets must absorb at a time when new government borrowing is still large, it added.

Fitch noted that the global economy saw a quantitative easing of $5 trillion in 2020, $3 trillion in 2021 and another $500 billion in 2022, when central banks were raising money supply to keep economies functioning due to the coronavirus pandemic.

However, excess money supply caused inflation climbing to decades-high in economies around the world.

To fight inflation, the Fed raised interest rates by a total of 425 points in seven rate hikes last year, followed by another 25 basis points of rate increase on Feb. 1.

While the BoE's rate hikes raised its bank rate to 4%, the ECB's latest rate hike of 50 basis points carried its main refinancing operations rate to 3%.

ISTANBUL

Central banks' quantitative tightening is expected to total $2 trillion over the next two years, according to Fitch Ratings on Thursday.

However, excess money supply caused inflation climbing to decades-high in economies around the world.

To fight inflation, the Fed raised interest rates by a total of 425 points in seven rate hikes last year, followed by another 25 basis points of rate increase on Feb. 1.

While the BoE's rate hikes raised its bank rate to 4%, the ECB's latest rate hike of 50 basis points carried its main refinancing operations rate to 3%.