Open Market Activities Financial Glossary

What is it? The purchase or sale of government securities conducted by the Federal Reserve Bank of New York acting upon instruction from the Federal Reserve Board of Governors. Used to decrease the money supply when bonds are sold and the purchase funds paid the Fed are taken out of circulation or increase the money supply when newly created cash is used to buy securities. The changes in the money supply impact short-term interest rates and through that mechanism are the primary monetary tool of the FRB.

Finance Term Definition Added By: Kennedy

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