BANKING AFFAIRS

Detailed explanation-1: -In order to control money supply, the RBI buys and sells government securities in the open market. These operations conducted by the Central Bank in the open market are referred to as Open Market Operations.

Detailed explanation-2: -The use of open market operations as a monetary policy tool ultimately helps the Fed pursue its dual mandate-maximizing employment, promoting stable prices-by influencing the supply of reserves in the banking system, which leads to interest rate changes.

Detailed explanation-3: -The primary goal of monetary policy of RBI is to maintain price stability keeping in mind the objectives laid out in the economic plan. Price stability is extremely important for attaining sustainable growth. To maintain price stability, inflation must be kept in check.

Detailed explanation-4: -Open market operations (OMOs)–the purchase and sale of securities in the open market by a central bank–are a key tool used by the Federal Reserve in the implementation of monetary policy. The short-term objective for open market operations is specified by the Federal Open Market Committee (FOMC).

Detailed explanation-5: -Open market operations refer to the selling and purchasing of the treasury bills and government securities by the central bank of any country in order to regulate money supply in the economy. It is one of the most important ways of monetary control that is exercised by the central banks.