Tapering

Tapering

Subject – Economy

Context – THE US Federal Reserve said that it will curtail its extraordinary policy support for the American economy more quickly than predicted and underscored its plans to hike interest rates three times next year.

Concept –

• Fed tapering is the gradual reduction in the bond buying program of the US Federal Reserves.
• Tapering is the gradual winding down of central bank activities used to improve the conditions for economic growth.
• Tapering activities is primarily aimed at interest rates and investor expectations of what those rates will be in the future.
• These can include conventional central bank activities, such as adjusting the discount rate or reserve requirements, or more unconventional ones, such as quantitative easing (QE).
• In layman terms, it can be said that in ‘Quantitative Easing , there is increase in dollar supply and in Fed tapering, there is decrease in dollar supply.

To know more about Tapering, please refer August 2021 DPN.