Tapering.

In plain English

Tapering is the wind down phase of quantitative easing: purchases shrink step by step toward zero, which means support is being reduced but the balance sheet is still growing until the buying stops. It is a change in the rate of adding, not a subtraction. Central banks usually announce a schedule in advance so markets can adjust gradually rather than all at once. The phase after tapering is either holding the balance sheet steady or shrinking it. Long-term rates often rise during a taper because the largest buyer is stepping back from the market.

01Why it matters

Because mortgage rates track long-term bond yields, a taper announcement can lift the cost of a home loan months before any policy rate actually moves.

02The math, step by step

Say a central bank buys $120 billion of bonds a month and cuts that by $15 billion each month. After one month it buys $105 billion, after four months $60 billion, and the program hits zero in the eighth month. Total holdings still grow by about $480 billion along the way.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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