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.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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.

References in periodicals archive ?

A second factor supporting Bernanke's characterization of credit easing rather than quantitative easing is the effect of the Desk's open market operations on the Federal Reserve's balance sheet during the fourth quarter, as described earlier (fewer Treasury securities, more federal agency and mortgage-backed securities).

The financial crisis and the implementation of monetary policy

Historically, the Fed has offset the effect of discount window lending on the total supply of credit through open market operations. (2) That is, if depository institutions borrowed at the discount window, the Fed would offset the effect of this increased borrowing on the monetary base by selling a comparable amount of securities in an open market operation.

The fed, liquidity, and credit allocation

Suda put the shortfall in tenders in the open market operation in a positive light, saying the phenomenon is taking place because the financial system has been improving on the back of declining nonperforming loans.

BOJ's Suda hints at need to allow flexibility in liquidity target

(23.) The proposal is called z directive because it provides instructions to the manager of the system's portfolio about how he or she should conduct open market operations during the intermeeting period--specifically, to hit the target for the federal funds rate set by the Committee.

Inside the FOMC: in his new book, a former Fed governor provides a rare glimpse of the inside workings of the Greenspan Federal Reserve

If there is a systemwide shortage or surplus of settlement balances, the Bank of England conducts open market operations or lending operations to adjust the overall amount of settlement balances.

Monetary policy without reserve requirements: case studies and options for the United States

The president of the New York bank is always a member because the New York bank is charged with the open market operations both in Treasury securities and in foreign exchange.

The Federal Reserve voice - active or passive?

"Our active domestic open market operations interact in close coordination with foreign exchange market operations, adjustments to reserve requirements, systemic macro-prudential measures and risk-based supervision of individual banks," added Espenilla.

BSP's TDF auction fetches higher rates

5 (Petra)-- China's central bank today pumped in billions of dollars, stated to be the biggest since September, into the financial system in open market operations in a bid to ease a liquidity strain in the world's second largest economy.

China central bank injects billions to ease liquidity strain

China's key money rate fell to nearly a 10-month low, shrugging off a net drain in open market operations due to ample liquidity.

CHINA'S KEY MONEY RATE FALLS NEAR 10-MONTH LOW

Open market operations can be another source of liquidity to the system.

Providing liquidity

It is commonly believed that the Fed's ability to control the federal funds rate stems from its ability to alter the supply of liquidity in the overnight market through open market operations. This paper uses daily data compiled by the author from the records of the Trading Desk of the Federal Reserve Bank of New York over the period March 1, 1984, through December 31, 1996: He analyzes the Desk's use of its operating procedure in implementing monetary policy and the extent to which open market operations affect the federal funds rate--the liquidity effect.

Open market operations and the federal funds rate

The yield on the key 10-year Japanese government bond briefly fell to a record intraday low Wednesday morning after the Bank of Japan said it will conduct open market operations to purchase government bonds.