{"id":15319,"date":"2024-01-30T18:07:09","date_gmt":"2024-01-30T12:37:09","guid":{"rendered":"https:\/\/kuvera.in\/blog\/?p=15319"},"modified":"2024-02-16T10:29:55","modified_gmt":"2024-02-16T04:59:55","slug":"all-you-need-to-know-about-tapering","status":"publish","type":"post","link":"https:\/\/kuvera.in\/blog\/all-you-need-to-know-about-tapering\/","title":{"rendered":"All You Need to Know About Tapering"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_40 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" area-label=\"ez-toc-toggle-icon-1\"><label for=\"item-69d1391acecd4\" aria-label=\"Table of Content\"><span style=\"display: flex;align-items: center;width: 35px;height: 30px;justify-content: center;direction:ltr;\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/label><input  type=\"checkbox\" id=\"item-69d1391acecd4\"><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/kuvera.in\/blog\/all-you-need-to-know-about-tapering\/#What_Is_Tapering\" title=\"What Is Tapering?\">What Is Tapering?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/kuvera.in\/blog\/all-you-need-to-know-about-tapering\/#How_Does_Tapering_Work\" title=\"How Does Tapering Work?\">How Does Tapering Work?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/kuvera.in\/blog\/all-you-need-to-know-about-tapering\/#Why_Do_You_Need_to_Know_About_Tapering\" title=\"Why Do You Need to Know About Tapering?\">Why Do You Need to Know About Tapering?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/kuvera.in\/blog\/all-you-need-to-know-about-tapering\/#The_Advantages_of_Tapering\" title=\"The Advantages of Tapering\">The Advantages of Tapering<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/kuvera.in\/blog\/all-you-need-to-know-about-tapering\/#Disadvantages_of_Tapering\" title=\"Disadvantages of Tapering\">Disadvantages of Tapering<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/kuvera.in\/blog\/all-you-need-to-know-about-tapering\/#Impact_of_Tapering_On_Stock_Market\" title=\"Impact of Tapering On Stock Market\">Impact of Tapering On Stock Market<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/kuvera.in\/blog\/all-you-need-to-know-about-tapering\/#Significance_Of_Tapering_On_Economy_And_Market\" title=\"Significance Of Tapering On Economy And Market\">Significance Of Tapering On Economy And Market<\/a><ul class='ez-toc-list-level-4'><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/kuvera.in\/blog\/all-you-need-to-know-about-tapering\/#Frequently_Asked_Questions_FAQs\" title=\"Frequently Asked Questions (FAQs)\">Frequently Asked Questions (FAQs)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/kuvera.in\/blog\/all-you-need-to-know-about-tapering\/#What_is_Quantitative_Easing_QE\" title=\"What is Quantitative Easing (QE)?\">What is Quantitative Easing (QE)?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/kuvera.in\/blog\/all-you-need-to-know-about-tapering\/#What_does_tapering_mean\" title=\"What does &#8220;tapering&#8221; mean?\">What does &#8220;tapering&#8221; mean?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/kuvera.in\/blog\/all-you-need-to-know-about-tapering\/#Interested_in_how_we_think_about_the_markets\" title=\"Interested in how we think about the markets?\">Interested in how we think about the markets?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p><span style=\"font-weight: 400;\">A central bank is a financial institution with exclusive authority over the creation and distribution of money and credit for a nation or group of nations. In modern economies, the central bank is often responsible for developing monetary policy and regulating member banks.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">According to the Reserve Bank of India Act of 1934, the Department of Currency Management is responsible for managing the Reserve Bank&#8217;s currency management obligations. Currency management focuses primarily on the issuance of coins and notes as well as the withdrawal of unsuitable currency notes from circulation. The value of the rupee can also be affected by the monetary policies of the central bank. The RBI can alter the repo rate (the rate at which it lends to banks) and the statutory liquidity ratio to maintain control of the currency (the percentage of net time and demand liabilities that banks must put in liquid assets).<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/www.kuvera.in\/dl\/v2\/?redirect_to=dashboard-invest\/fixed-deposit?source=fd_blog_banner\"><img loading=\"lazy\" class=\"alignnone wp-image-26868\" src=\"https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2023\/10\/400X100-Size-300x75.png\" alt=\"FD Rates October 2023\" width=\"400\" height=\"100\" srcset=\"https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2023\/10\/400X100-Size-300x75.png 300w, https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2023\/10\/400X100-Size-150x38.png 150w, https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2023\/10\/400X100-Size.png 400w\" sizes=\"(max-width: 400px) 100vw, 400px\" \/><\/a><\/p>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_Is_Tapering\"><\/span>What Is Tapering?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">When an economy is strained, that is, when the government perceives a liquidity shortage, the central bank purchases a fixed quantity of government bonds and other assets to inject cash into the economy. This is referred to as &#8220;quantitative easing.&#8221; This recently occurred when the coronavirus pandemic swept the globe, causing all economies to collapse and industry and production to cease. Most central banks, notably the Federal Reserve of the United States and the Reserve Bank of India, have taken steps to stimulate the economy by lowering interest rates and placing more money in the hands of the people.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">On the other hand, tapering refers to a banking strategy in which the central bank gradually dials down quantitative easing. Simply put, tapering occurs when the central government stops injecting money into the economy and banks by gradually decreasing its bond purchases in order to wean the economy off the additional support.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Now, tapering is not a novel phenomenon. However, the first time it occurred in a digitally advanced and awakened period (2013), Taper Tantrum, caught the world by storm. As a result of investors&#8217; and stakeholders&#8217; exaggerated response to the government&#8217;s announcement of the tapering of the quantitative easing program, the term &#8220;tantrum&#8221; was coined.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The 2008 financial crisis, which precipitated a protracted recession, resulted in the panic-induced sale of stocks and bonds. The federal government of the United States acted swiftly and launched a large-scale purchase of government bonds as well as other quantitative easing measures. This helped to maintain low loan rates and also increased liquidity in the economy, assuring investors of a brighter future.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The low-interest rates encouraged more individuals to take out loans, which increased consumption and enabled corporations to increase investment. Between 2008 and 2015, the U.S. government injected approximately $4.5 trillion into its economy, a sum that had been only $870 billion between 2007 and 2008.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Noting that injecting capital into the economy to absorb shocks is a short-term solution that can lead to hyperinflation if employed over the long run.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">After the U.S. economy showed indications of improvement, the government announced a 2013 reduction in the quantitative easing program. This statement wreaked havoc on the American market, which fell 4% following the release and set off a chain reaction across the globe. Digitally supercharged investors blew it up globally, and global markets began to respond negatively to a factor that should have been anticipated.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Impact on Emerging Economies: As a result of the low lending rates during the QE period in the United States, borrowers were ecstatic while lenders were anxious. Although there was more capital available for lending, the low-interest rates caused the lender&#8217;s concern. The additional stimulus delivered to the financial sector must be utilized. Then, American investors began placing capital in Asian markets, including rising nations such as India. The result was an increase in foreign investment in India.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">However, when the U.S. Federal Reserve began tapering, American investors in India began withdrawing their funds since higher interest rates in the U.S. gave them a better return on their investments. As foreign investments withdraw, the rupee&#8217;s value plummets and depreciates by a large percentage. This requires the RBI to immediately increase interest rates. The strengthening of the U.S. dollar has led to an increase in the incidence of inflation in India. This initiated the phenomenon known as the Taper Tantrum, an investor exaggeration that nearly ruined developing countries.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Not just India, but also other emerging markets such as Indonesia, Brazil, and Turkey, were adversely impacted by inflationary pressures, with the deterioration of their currencies versus the US dollar exacerbating the suffering. Investors feared that this would spark a global panic, but happily, this nightmare did not come true. This does not imply that the markets did not respond.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"How_Does_Tapering_Work\"><\/span>How Does Tapering Work?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Central banks have a variety of growth-enhancing tools available to them, and they must reconcile short-term economic trends with longer-term market expectations. A recession may ensue if the central bank ceases its activity too rapidly. If it does not reduce its actions, inflation could grow in an undesirable manner.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">By being transparent with investors regarding future banking activity, it is possible to generate market anticipation. Therefore, central banks often unwind their loose monetary policies gradually rather than abruptly.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Central banks can lessen market volatility by articulating their tapering strategy and outlining the conditions under which reduction will commence or end. In this manner, anticipated cutbacks are discussed in advance, allowing the market to begin adjusting before the action occurs.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Why_Do_You_Need_to_Know_About_Tapering\"><\/span>Why Do You Need to Know About Tapering?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">In 2013, as US Treasury rates soared, it sparked a multi-month outflow of capital from emerging market economies that started in May of that year. From May 22 to August 30, 2013, the rupee&#8217;s value decreased by over 15%. The RBI has to abruptly raise interest rates to stop the withdrawals.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">When interest rates on US government bonds are rising, investors are less inclined to invest in riskier assets like equities.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">As an investor, it is pertinent to understand the phenomenon such as QE and Tapering because central banks such as the Federal Reserve or Reserve Bank of India, their actions with respect to tapering or quantitative easing are internationally related which affects the investment market across the globe.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"The_Advantages_of_Tapering\"><\/span>The Advantages of Tapering<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\"><strong>Economic regulation:<\/strong> Tapering aids in lowering inflation and inflation expectations while cooling an overheating economy.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\"><strong>Price Stability:<\/strong> By balancing supply and demand across all markets, including the labor and housing markets, tapering aids in the achievement of price stability.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\"><strong>Stronger Dollar:<\/strong> A tighter Fed policy often strengthens the U.S. dollar relative to other currencies, making imports and foreign trips more inexpensive for U.S. citizens. Since there is an inverse relationship between the U.S. dollar and global commodity prices, tapering should, in theory, bring down commodity prices. However, this affects the economies of several countries.\u00a0\u00a0<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Disadvantages_of_Tapering\"><\/span>Disadvantages of Tapering<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\"><strong>Higher interest rates:<\/strong> Tapering, especially if followed by additional tightening measures, can be expected to precede rising interest rates. As a result, borrowing becomes more expensive, and economic growth is delayed.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\"><strong>Weakened economic indicators:\u00a0<\/strong> The GDP, the employment rate, and consumer confidence can all be negatively impacted by tapering.<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Impact_of_Tapering_On_Stock_Market\"><\/span>Impact of Tapering On Stock Market<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Following the 2013 tapering, investors expected a <a href=\"https:\/\/kuvera.in\/stocks\/listing\/all\">stock market<\/a> catastrophe. Nevertheless, the impact was minimized and, thankfully, limited. As tapering began in the United States, bond yields and interest rates began to increase. The <a href=\"https:\/\/kuvera.in\/explore\/us-stocks\">U.S. stock market<\/a> fared excellently, although the impact on Indian markets was negligible. From 2013 to January 2020, the Sensex grew by 105 percent (just before the pandemic).<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Critics of QE fear asset price bubbles since the values of financial assets\u2014particularly debt instruments like bonds, but also stocks\u2014are inversely related to interest rates. Low borrowing rates and low returns on financial assets may have contributed to speculative bubbles in physical assets like real estate. Similarly, QE may result in an increase in the flow of funds into cryptocurrencies. If tapering actually raises interest rates, speculative bubbles supported by historically low-interest rates may implode.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Significance_Of_Tapering_On_Economy_And_Market\"><\/span>Significance Of Tapering On Economy And Market<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The policy of tapering is the opposite of quantitative easing (QE). It occurs when the government progressively discontinues its quantitative easing (QE) policy. For instance, the US government currently makes monthly asset purchases of $85 billion. Tapering would occur if the US government reduced its asset purchases from $85 billion to $60 billion the next month.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The Federal Reserve System, also known as the &#8220;Fed&#8221;, has been debating tapering for the last few years. But even a passing suggestion of curtailing quantitative easing (QE) sends the markets tumbling. For this reason, the Fed usually holds off and attempts to find a better solution and window of opportunity to handle the predicament.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">In both American and international markets, the tapering strategy has been heavily discussed. This is due to the fact that it is both the most significant and the least common monetary policy in existence today. This policy&#8217;s scope is what gives it this level of significance. A long-lasting and significant impact on a range of economic parameters will result from how this policy&#8217;s ramifications play out.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>Interest Rates:<\/b><span style=\"font-weight: 400;\"> The tapering&#8217;s most significant effect will be felt in interest rates. The effect virtually happens instantly. In fact, quantitative easing (QE) is typically implemented when interest rates are already at zero but the central bank wishes to offer more stimulus. Hence, quantitative easing (QE) can be thought of as a sub-zero interest rate policy.\u00a0 Thus, when implemented, the quantitative easing (QE) strategy decreases interest rates. Since it has been available on the market for the last few years, consumers have become accustomed to it. Thus, it is anticipated that when tapering is implemented, interest rates will rise. This is because lenders will need to ration their lending because of a constrained money supply. They will lend money to whoever can give the greatest interest rates, and as a result of this competition, interest rates will surge.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>Inflation and Deflation:<\/b><span style=\"font-weight: 400;\"> The policy of quantitative easing (QE) is inflationary. This is because it essentially expands the monetary base in the economy. Therefore, when there is a greater supply of money chasing relatively fewer goods, <a href=\"https:\/\/kuvera.in\/blog\/what-is-inflation-and-how-it-works\/\">inflation<\/a> happens and prices rise. The United States has seen three rounds of significant quantitative easing (QE), and as a result, prices are significantly inflated as compared to what they would have been otherwise.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Consequently, when the opposing policy of tapering is applied, deflation is likely to occur. This is due to the fact that tapering removes money from the system. As a result, there is now less money (as compared to before) chasing the goods available, making goods less expensive.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>Employment:<\/b><span style=\"font-weight: 400;\"> Generally, the state of inflation or deflation in the economy has a significant impact on the employment rate. Economic confidence is high, and more goods are produced when there is excess money in the economy. As a result, an increasing number of individuals are working in the economy. Therefore, there is a positive correlation between increased employment and quantitative easing (QE).<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Contrarily, when there is less money in the economy, consumer confidence is low, people are buying fewer items, and as a result, producers are manufacturing fewer items. Thus, a decline in the money supply leads to a decline in employment levels. Thus, a policy of tapering leads to lower employment levels.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>GDP:<\/b><span style=\"font-weight: 400;\"> Gross Domestic Product or GDP is the total value of goods produced and services provided in a country during one year. Therefore, there is a direct relationship between the amount of money in circulation and the Gross Domestic Product (GDP). When quantitative easing (QE) is undertaken, an economy&#8217;s GDP increases and it enters the peak phase of the economic cycle. On the other hand, when the tapering program is implemented, the GDP of an economy decreases, causing it to enter a recession.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>Asset Prices:<\/b><span style=\"font-weight: 400;\"> Any economy&#8217;s money supply is linked to its asset prices. Everybody in the economy has greater purchasing power as the money supply rises, which often leads to rising asset prices. In contrast, asset prices tend to deflate when the money supply declines. This is precisely what is projected to occur if tapering occurs.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions_FAQs\"><\/span>Frequently Asked Questions (FAQs)<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\">\n<h4><span class=\"ez-toc-section\" id=\"What_is_Quantitative_Easing_QE\"><\/span>What is Quantitative Easing (QE)?<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Quantitative easing (QE) is a sort of unconventional monetary policy in which a country&#8217;s central bank, like the Federal Reserve, makes significant open market purchases of long-term securities in an effort to boost the economy by increasing the money supply and promoting lending and investment.<\/span><\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\">\n<h4><span class=\"ez-toc-section\" id=\"What_does_tapering_mean\"><\/span>What does &#8220;tapering&#8221; mean?<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">In finance, tapering refers to the gradual reversal of a central bank&#8217;s QE plan. While QE is intended to increase economic growth, tapering slows down economic growth by reducing the pace of a central bank&#8217;s asset purchases.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Interested_in_how_we_think_about_the_markets\"><\/span>Interested in how we think about the markets?<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>Read more:\u00a0<a href=\"https:\/\/kuvera.in\/blog\/category\/zen-and-the-art-of-investing\/\" target=\"_blank\" rel=\"noopener noreferrer\"><strong>Zen And The Art Of Investing<\/strong><\/a><\/p>\n<p>Watch\/hear on YouTube:<\/p>\n<p>&nbsp;<\/p>\n<div class=\"embed-container\"><iframe src=\"https:\/\/www.youtube.com\/embed\/TtQUlfRdtmo\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><span data-mce-type=\"bookmark\" style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" class=\"mce_SELRES_start\">\ufeff<\/span><\/iframe><\/div>\n<p>&nbsp;<\/p>\n<p>Start investing through a platform that brings goal planning and investing to your fingertips. Visit\u00a0<a href=\"https:\/\/app.kuvera.in\/\">Kuvera.in<\/a>\u00a0to discover\u00a0<a href=\"https:\/\/kuvera.in\/blog\/direct-plans-better\/\">Direct Plans<\/a>\u00a0and\u00a0<a href=\"https:\/\/app.kuvera.in\/explore\/fixed-deposit\/c\/all\">Fixed Deposits<\/a>\u00a0and\u00a0<a href=\"https:\/\/kuvera.in\/user\/login\">start investing today.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A central bank is a financial institution with exclusive authority over the creation and distribution of money and credit for a nation or group of nations. In modern economies, the central bank is often responsible for developing monetary policy and regulating member banks. &nbsp; According to the Reserve Bank of India Act of 1934, the [&#8230;]<\/p>\n<p><a class=\"btn btn-secondary understrap-read-more-link\" href=\"https:\/\/kuvera.in\/blog\/all-you-need-to-know-about-tapering\/\">Read More&#8230;<\/a><\/p>\n","protected":false},"author":11,"featured_media":28325,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false},"categories":[99],"tags":[1399,1400,1398],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What is Tapering? 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