What's Quantitative Easing? When the economy is faltering, the federal government needs a way to stimulate the economy. This is often done by purchasing bonds (like U.S. Treasuries) with money that can literally be printed for this purpose. Banks now have access to more money, and because many bonds are being bid up to higher prices more people will see gains in their investments. However, this process suffers from the law of diminishing returns; keep going on with QE, and you will see very little benefit per each extra billion pumped in.
Tapering is the act of stopping bond-buying programs. The first taper is currently $10 billion, bringing down the bond-buying to $75 billion. By gently slowing down QE, the Fed hopes to avoid any major panics. Indeed, Bernanke's decision to start tapering indicates that he perceives a healthy economy to be in place in the US.
Now that it's 2014, Bernanke's time as the Fed chairman is up, with Janet Yellen ascending to the position. She will be the one to deal with the tricky business of tapering.
One thing to expect in 2014 is rising interest rates. As tapering increases and the pressures put on interest rates fades, the artificially low rates that have become the norm in the past few years will also disappear.
(The flow of money from bond-buying programs will slow down in 2014)
