At the moment, a single word is enough to excite investors and central bankers.

We are talking about so-called tapering, an English term that has had a peculiar career.

The literal translation means something like “reduction” and for a long time was mainly at home in the world of sports.

Endurance athletes usually go into a tapering phase a few days before the competition: They then reduce their training units so that the body can start the competition well rested.

Dennis Kremer

Editor in the "Money & More" section of the Frankfurter Allgemeine Sonntagszeitung.

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How the term got into the world of central banks is not known. But at least one parallel is obvious: stamina is also required in monetary policy. And like marathon runners, the central banks are facing a protracted competition these days: The question is about the right time to gradually exit their ultra-loose monetary policy, which in concrete terms also involves a reduction (i.e. with "tapering") has to do - namely with the throttling of their bond purchases.

These purchases have expanded the major central banks, the US Federal Reserve and the European Central Bank (ECB), in the past few years as never before in their history.

The Fed is currently buying bonds with a volume of around 120 billion dollars a month, while the ECB has a volume of almost 90 billion euros.

The markets and the world have got used to the billions, which were particularly welcome after the outbreak of the Corona crisis in order to stabilize the global economy and keep it from collapsing.

The financial markets are nervous

But now everywhere, even with some advocates of very loose monetary policy, the feeling is spreading that things cannot go on like this forever. How sensible is it to buy billions in bonds month after month when the world economy is noticeably better and at the same time many people are gripped by an old fear - the fear of inflation? No question is currently being discussed more intensively on the stock exchanges. After all, it depends in no small measure on the wise action of the central banks whether the good times on the stock markets continue or not. There are therefore important weeks ahead for investors: How great the nervousness is can be seen in the recent sharp ups and downs in prices. The central banks, which otherwise tend to remain confidential, have recognized that they cannot avoid the discussion and have expressed themselves quite openly,for their standards at least.

Jerome Powell, head of the American Fed, even mentions a possible date, without, however, being committed to it: The United States could start tapering in December. The ECB is not quite ready yet. In a slightly modified version of a famous quote from Margaret Thatcher, central bank chief Christine Lagarde even said in public: “The lady is not for tapering”. Council announced a fundamental decision on the continuation of PEPP for December - that part of the bond purchase program that the ECB launched during the Corona crisis. The British financial newspaper Financial Times, a strong voice in the debate, comments on the situation as follows:"The situation has shifted in the direction of throttling."

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