Explainer: A Visual Introduction to Fed Tapering
The Federal Reserve began tapering its large-scale asset purchases in November 2021, a move likely influenced by:
More than $4 trillion in capital was injected into the economy through quantitative easing (QE), over the course of the pandemic, inflation is at 40-year highs, and unemployment levels hover below 4%.
As Fed policy responds to a recovering U.S. economy, this Markets in a Minute chart from New York Life Investments shows how Fed tapering works, and its impact on the economy.
How Fed Tapering Works
Fed tapering is the unwinding of the Federal Reserve’s large-scale asset purchases.
After the 2008 financial crisis, large scale asset purchases were introduced for the first time to inject liquidity into the market and help restore confidence. During the pandemic, they were introduced once more, at a rate of $120 billion per month.
Here’s how it works: