Matched Sale Purchase Transactions

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Matched Sale Purchase Transactions

Transcations in which the Federal Reserve sells a government security to a dealer or a foregin central bank and agrees to buy back the security to a dealer or a foreign central bank and agrees to buy back the security on a specified date (usually within seven days) at eh same price (the reverse of a repurchase agreement). Such transaction allow the Federal Reserve to temporarily absorb excess reserves from the banking system, limiting the ability of banks to make new loans and investments.

Matched Sale Purchase Transactions

A practice in which the Federal Reserve sells government securities with the proviso that it will buy back these same securities from the same party at the same price, usually within a week or two. This is a way for the Federal Reserve to tighten the money supply temporarily. It is a type of reverse repurchase agreement.