Open market operations

Also known as OMO, this relates to the federal government’s method of buying and selling of government securities in the open market to directly increase or decrease the amount of money in the banking system.

Regulating the open market operation is one of three primary tools used to regulate the monetary policy.  The U.S. Federal Reserve makes purchases to inject money into the system and increase growth or it can also shrink the market by selling securities.  The Fed also uses the discount rate and reserve requirement to regulate monetary policy, which is the rate at which banks borrow reserves from one another.