What Is Tapering?

Tapering is a term used to describe measures that alter typical central bank operations. Interest rates and market estimates of future interest rate direction are the primary targets of tapering initiatives. Changes in the discount rate or reserve requirements might be part of the tapering strategy.
Tapering may also imply a slowdown of asset purchases, which may possibly result in a central bank’s quantitative easing (QE) programs being reversed. After QE measures have had the desired impact of boosting and stabilizing the economy, tapering is implemented. Tapering can only be implemented after some form of economic stimulus has been implemented.