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taper

noun [uncountable]

in finance, a gradual reduction in the amount of new money which is supplied by a central bank in order to aid economic recovery

tapering

noun [uncountable]

taper

verb [transitive/intransitive]

'When Ben Bernanke first floated the idea of the taper back in May, the notion was that the trigger for the taper would be falling unemployment.'

Guardian 19th September 2013

'Federal Reserve surprises markets by delaying QE tapering ... The US Federal Reserve surprised markets by keeping its quantative easing programme running at full throttle, highlighting the difficulties still facing the global economic recovery.'

The Telegraph 20th September 2013

'On September 18th, at the end of a closely watched meeting, the Federal Open Market Committee, the Fed's policy-setting body, chose not to taper.'

The Economist 21st September 2013

In May 2013, a new sense of an established word took the financial world by storm. The US Federal Reserve (the country's central banking system) suggested that an improving economic picture might mean it could scale back its bond buying and thereby in principle reduce the amount of 'new' money it was introducing into the banking system. Amid fierce speculation on the wisdom of doing so, more conventional expressions such as cut back, scale down or reduce were set aside in favour of taper as the preferred term of reference for such a move.

taper … is a situation where a central bank gradually reduces the flow of 'new' cash, on the basis that not so much is needed because it believes the economy is getting back on its feet

The financial sense of taper is inextricably linked to the concept of quantitative easing. The latter describes a method of pumping extra funds into the banking system by 'creating' money, something which a nation's central bank has the power to do. The idea is that this will allow banks to continue lending and get money flowing around the economy. Taper, then, is a situation where a central bank gradually reduces the flow of 'new' cash, on the basis that not so much is needed because it believes the economy is getting back on its feet.

In the event, the cautious optimism about economic recovery intimated by use of the word taper in the spring turned out to be short-lived. In mid-September, the word abruptly returned to the spotlight when in the light of the prevailing economic climate the Federal Reserve announced that there would in fact be no taper contemplated until further into the autumn, and possibly not until early 2014 or later.

Background – taper

Taper in the financial domain occurs as both a noun and a verb, with the noun tapering also very common as a description of the activity. Like the core sense of the verb, the financial sense of taper can be both transitive or intransitive so that for example we can talk about the central bank deciding to taper or bond purchases being tapered by the central bank.

In its core meaning, taper as a verb means 'to gradually become less or narrower'. Until this recent use in financial contexts, the only noun senses of taper referred to physical objects (a thin candle or a long, thin piece of wood used for carrying a flame). The word is from old English and is what's technically known as a dissimilated form of the Latin word papyrus (the initial p is changed to t). Papyrus was used in candle wicks.

This new use of taper is a further example of the financial domain's penchant for describing relatively mundane concepts with words which are a little more flowery. Another example from recent years is use of the adjective toxic to refer to a loan or financial agreement which has an extremely negative impact on banks or other financial institutions.

by Kerry Maxwell, author of Brave New Words

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This article was first published on 24th September 2013.

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