Open Market Operations

From Reuters Financial Glossary

Routine intervention by central banks in financial markets, usually by means of sale or purchase of securities in the domestic money market, in order to influence the volume of money and credit in the economy. The intervention usually involves short-term government securities and purchases of such paper from commercial banks, which puts cash in their hands, injecting reserves into the system to expand credit. However, sales of government securities by a central bank drains cash from the commercial banks, reduces reserves and limits credit expansion.