ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The other major tool available to the Fed is open market operations (OMO), which involves the Fed buying or selling Treasury bonds in the open market. This practice is akin to directly manipulating interest rates in that OMO can increase or decrease the total supply of money and also affect interest rates.

Detailed explanation-2: -OMOs is a tool in monetary policy that allows a central bank to control the money supply in an economy. Depending on the condition of the economy, central banks will seek to implement either contractionary or expansionary monetary policy.

Detailed explanation-3: -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-4: -Open Market Operations This consisted of buying and selling U.S. government securities on the open market, with the aim of aligning the federal funds rate with a publicly announced target set by the FOMC. The Federal Reserve Bank of New York conducts the Fed’s open market operations through its trading desk.