Another Form of Monetary Tightening Continues

Many central banks appear to have ended their rate‑hiking cycles. But interest rate hikes aren’t the only mechanism tightening monetary conditions. After bloating their balance sheets during the pandemic, most central banks are currently in a tightening cycle. Unless a major recession or financial instability arises, most central banks will stay on this path in 2024. Since this is reducing the excess liquidity in financial markets, it may be a factor that prevents global bond yields from falling as much as could otherwise be expected.