Open market operation (OMO) is a term that refers to the purchase and sale of securities in the open market by the Federal Reserve (Fed). The Fed conducts open market operations to regulate the supply of money that is on reserve in U.S. banks. The Fed purchases Treasury securities to increase the money supply and sells them to reduce it.

By using OMOs, the Fed can adjust the federal funds rate, which in turn influences other short-term rates, long-term rates, and foreign exchange rates. This can change the amount of money and credit available in the economy and affect certain economic factors, such as unemployment, output, and the costs of goods and services.

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