Open Market Operations: Key Concepts

  • Temporary open market operations involve repurchase and reverse repurchase agreements that are designed to temporarily add or drain reserves available to the banking system.

  • Permanent open market operations involve the buying and selling of securities outright to permanently add or drain reserves available to the banking system.

  • The federal funds rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.