Definition of tapering
The word tapering in financial terms is increasingly being used to refer to the anticipated reduction of the Federal Reserve's quantitative easing, or bond buying programme.
tapering in the news
In June 2013 speculation was rising that the Fed would start on a tapered end to QE in 2014. The increase in bond yields had already inflicted heavy losses on bond investors. There were mixed opinions on whether tapering or suspending QE will be good for markets or not. Low rates hit banks' net interest margins, but precisely because that has been the case banks have quietly been adopting novel strategies to boost earnings, such as extending longer-term loans at fixed rates, or investing in complex structured products. This could potentially create big losses if rates rise, particularly if this swing occurs dramatically.
But by September 2013 the markets were thrown into fresh turmoil when the Fed chose not to reduce its asset purchases and chairman Ben Bernanke seemed to back away from some of the guidance that the Fed gave in June.