The four basic tools using which the Federal Reserve Board fine-tunes money growth are reserve requirements, discount rates, credit controls, and open market operations.
The Federal Reserve's open market operations (OMOs)—the purchase and sale of securities in the open market by a central bank—are a key tool in the implementation of monetary policy. The Federal Open Market Committee establishes the short-term goal for open market operations (FOMC).
The Federal Reserve uses open market operations to move the federal funds rate and influence other interest rates. It does this to either stimulate or slow the economy. By purchasing Treasury securities, the Fed can increase the money supply and lower the fed funds rate.
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