Open Market Operations
What is Open Market Operations?
Central bank purchases and sales of government securities to manage reserves and interest rates.
Understanding Open Market Operations
Buying bonds adds reserves to the banking system and tends to push interest rates down; selling bonds does the opposite. They were the main traditional tool for hitting the policy rate target.
Today the Fed mainly steers the federal funds rate by setting the interest it pays on reserve balances, while large-scale asset purchases have been used as quantitative easing.