Glossary · Macro · Monetary policy

Open market operations (OMO)

The central bank buying or selling government bonds. Buying pays money into the banking system, expands reserves and the money supply, and lowers interest rates. Selling does the reverse. It is the everyday tool of monetary policy.

Also called: OMO, bond purchases

Watch it happen step by stepTaught in: Central Bank Tools

Related terms

Money supply (M1 and M2)Central bank toolsMoney market

More from monetary policy

Central bank credibilityDiscount rateForward guidanceInflation biasInterest on reserves (IOR)Liquidity trapLucas critique

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