Stocks slump as Powell signals Fed tapering may speed up. Why does it matter?

What happened:

The U.S. stock markets plummet in the midday after Federal Reserve Chairman Jerome Powell said he expects policymakers in December to discuss accelerating the timetable for the tapering of monthly bond purchases.

Speaking before a Senate panel, he said tapering could wrap up "a few months sooner" than anticipated. That would open the door to interest rate hikes thereafter.

Buying assets-backed securities to stimulate economic recovery is one of tools used by the U.S. Federal Reserve to manage the health of economy.

Such asset buying, along with a low interest rate is called quantitative easing (QE). It's a way of pumping money into the economy.

When the Fed believes that they economy has recovered sufficiently, it will wind down asset purchases. This process is called tapering.

Reduction usually heralds the end of quantitative easing financial policies. And it’s a signal of monetary tightening.

In other words, the interest rate will rise and we need bear higher costs such as company borrowing costs, mortgages, auto and housing loans.