Tapered monetary policy refers to the gradual reduction of the pace at which a central bank, like the Federal Reserve, purchases financial assets, such as government bonds. This approach is often used to signal a shift from an expansionary monetary policy, which aims to stimulate the economy, to a more neutral stance as economic conditions improve. By tapering asset purchases, the central bank aims to prevent overheating in the economy and control inflation. This process allows for a smoother transition to higher interest rates, helping to maintain economic stability while still supporting growth during the recovery phase.