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Finance Dictionary and Glossary of Investment Terms
open market operation
Definition 1.
The buying and selling of government securities by a central bank, such as the Federal Reserve Bank in the U.S., in order to control the money supply.
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Definition 2.
One of the three means of conducting Monetary Policy used by the Federal Reserve. It involves the purchase and sale of government securities by the Federal Reserve Bank of New York (as directed by the Federal Open Market Committee) in an effort to regulate the money supply. The actions of the New York Fed effectively alter bank reserves which, in turn, affects the supply of credit. The impact of these actions is felt throughout the economy.
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