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Open-Market Operations

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Open-Market Operations
The buying and selling of U.S. Treasury securities. The Federal Reserve conducts open market operations as a primary way of influencing inflation and economic growth. These securities are sold at certain interest rates as a way of controlling the money supply. See also: FOMC.

open-market operations
The purchase and sale of government securities from a primary dealer in the open market by the Federal Reserve in order to influence the money supply, credit conditions, and interest rates. For example, large purchases of securities will release funds into bank reserves which, in turn, will be used for lending. This action increases the supply of money, and, at least temporarily, pushes down interest rates. Open-market operations have significant effects on security prices. See also Federal Open Market Committee.

Open-market operations. Open-market operations allow the Fed to implement its monetary policy and regulate the money supply.

The Federal Reserve's Open Market Committee (FOMC) regularly instructs the securities desk of the Federal Reserve Bank of New York to buy or sell government securities as part of the process of increasing or decreasing the cash available for lending.



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Thus, expansionary monetary policy via standard open-market operations by a central bank is the first item on the checklist of what to do in a financial crisis.
Besides expanding the TAF's money-creating activity, the Fed also announced an additional $100 billion to be offered in the form of 28-day repos through the Fed's open-market operations.
[GRAPHIC OMITTED] Except for the instruments involved, the mechanics of an intervention are exactly like those of an open-market operation, and like open-market operations, foreign-exchange interventions have the potential to alter the amount of reserves in the banking system.
 
 
 
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