what is the taper tantrum 
the phrase taper tantrum describes the 2013 surge in u s treasury yields resulting from the federal reserve s fed announcement of future tapering of its policy of quantitative easing the fed announced that it would be reducing the pace of its purchases of treasury bonds to reduce the amount of money it was feeding into the economy the ensuing rise in bond yields in reaction to the announcement was referred to as a taper tantrum in financial media understanding taper tantrumin reaction to the 2008 financial crisis and ensuing recession the federal reserve executed a policy known as quantitative easing qe which involves large purchases of bonds and other securities in theory this increases liquidity in the financial sector to maintain stability and promote economic growth stabilizing the financial sector encouraged lending to allow consumers to spend and businesses to invest historically quantitative easing the monetary policy designed to infuse more dollars into the circulation of the economy has been considered only usable as a short term fix because of the danger that could arise from falling dollar values leading to hyperinflation traditional economists would insist that when the federal reserve feeds the economy for too long there are unavoidable consequences tapering which gradually reduces the amount of money the fed pumps into the economy should theoretically incrementally reduce the economy s reliance on that money and allow the fed to remove itself as the economy s crutch however since 2015 the fed has found a variety of ways to infuse cash into the economy without lowering the value of the dollar these new policy tools such as the repurchase window may have ushered in a new chapter in the future study of macroeconomic policy though it will be several years before economists and academics in hindsight will be willing to declare such tools effective or dangerous however investor behavior always involves not just current conditions but expectations of future economic performance and fed policy if the public gets word that the fed is planning to engage in tapering panic can still ensue because people worry that the lack of money will trigger market instability this is particularly a problem the more dependent the market has become on continued fed support 