Open Market Operations

Open Market Operations (OMO) are a monetary policy tool used by central banks to regulate money supply and maintain a desired level of short-term interest rates in the economy. OMO involves the buying and selling of government bonds in the open market in order to increase or decrease the money supply.

For example, if the central bank wants to increase the money supply, it will buy government bonds in the open market, thus increasing the amount of money available in the economy. On the other hand, if the central bank wants to decrease the money supply, it will sell government bonds in the open market, thus reducing the amount of money available in the economy.