Open Market Operations is a tool of monetary policy often used by the fed for altering the reserves of commercial banks.
Open market operations are the most often utilized monetary policy tool in the United States. The central bank sells or buys U.S. securities when it conducts open market operations to influence the volume of bank reserves as well as the level of interest rates. Treasury bonds.
The federal funds rate is the precise interest rate that open market operations target. Since the federal funds rate is the rates of interest charged by commercial banks when making financial difficulties to other banks, the name is rather misleading. Because of this, although being a relatively short-term interest rate, it correctly reflects the credit situation on the financial markets.
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