Quantitative tightening in the euro area - compilation of papers

The term "quantitative tightening" refers to the process of decreasing the central bank's balance sheet through a reduction of asset holdings acquired during "quantitative easing". Over the years, the Eurosystem acquired a substantial portfolio of assets as part of its asset purchase programmes. While the European Central Bank (ECB)'s Governing Council decided already in 2022 to stop net purchases, reinvestments of principal repayments continued until March 2023, thus maintaining the exisiting stock of assets. As part of a broader monetary policy normalisation process, the ECB is now, for the first time ever, implementing quantitative tightening. Between March and June 2023, the Eurosystem will reduce its asset holdings under the asset purchase programme (APP) by EUR 15 billion per month. The subseqent pace of reduction will be decided at a later stage. Five papers were prepared by the ECON Committee’s Monetary Expert Panel, analysing the rationale, risks and benefits of quantitative tightening in the euro area. This publication is provided by the Economic Governance and EMU Scrutiny Unit (EGOV) for the Committee on Economic and Monetary Affairs (ECON), ahead of the Monetary Dialogue with ECB President Christine Lagarde on 20 March 2023.