When Central Banks Buy Government Bonds for Their Own Account

Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates · Aug 1, 2026 · 8m · transcript

In this episode, Lucas and Luna unpack the quiet but powerful tool central banks use to shape long-term borrowing costs: buying government bonds for their own account. They trace how the Bank of Japan has held its foot on the accelerator for decades, why the Federal Reserve's balance sheet shrinks even as it continues buying Treasuries, and what it means for investors when the world's biggest buyer steps back. With a concrete example from the 2020 pandemic and a look at the current QT in 2026, they clarify the mechanics, the risks, and the politics of central-bank bond buying…