🔚Gradual decrease in central bank's activities that are used to improve conditions of the economy. Activities include quantitative easing, banks' reserve requirements and interest rates.
💲Reserve requirement is the cash that banks must to hold against customer deposits.
📉If central bank tapers too quickly, it may send the economy into a recession. If too late, it may lead to high inflation.
❕2013 Taper Tantrum. Bernanke announced that FED will no longer purchase bonds and it caused a panic because investors thought that the economy would be unstable without extra funds. As a result, bond yields significantly decreased.
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