Open Market Operations

The Federal Reserve purchases and sells U.S. Treasury securities on the open market in order to regulate the supply of money that is on deposit in U.S. banks, and therefore available to loan out to businesses and consumers. It purchases Treasury securities to increase the supply of money and sells them to reduce the supply of money. By using this system of open market purchasing, the Federal Reserve can produce the target federal funds rate it has set. It calls this process its open market operations.