Tapering refers to the gradual reduction of the pace at which a central bank, like the Federal Reserve, purchases financial assets. This process is often implemented to control inflation and stabilize the economy as it recovers from a recession. By decreasing these purchases, the central bank signals that the economy is improving and less support is needed. As tapering occurs, interest rates may rise, affecting borrowing costs for consumers and businesses. This can lead to changes in spending and investment behaviors. Tapering is a critical tool in monetary policy, helping to balance economic growth and inflation control.