Operations open market

The “ operations open market ” ( Open Market Operations ) indicate one of the three principal methods which the central banks use to carry out to them Monetary policy, two others being the fixing of their directing Taux and the level of obligatory Reserves for the Banking system.

When the central bank wants to reduce the “monetary Base”, it can sell titles (generally short Emprunt of State or good of the Treasury) with the Banque S; that results in a marginal increase in the interest rate and a reduction of the liquidity of the banking system. Contrary increasing the money circulation, the central bank will buy titles belonging to the banks, against payment near itself, which implies the entry in money circulation that the banks will be able to lend to their customers.

These operations of Open Market allow instantaneous adjustments of interest rates, for short periods, whereas the other techniques of monetary policy are less frequently used.

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