Open Market Operations

Explanation :

• Open Market Operations (OMO)is the sale and purchase of government securities and treasury bills by the central bank of the country.
• The objective of OMO is to regulate the money supply in the economy.
• When the central bank wants to increase the money supply in the economy, it purchases the government securities from the market and it sells government securities to suck out liquidity from the system.
• It carries out the OMO through commercial banks and does not directly deal with the public.
• OMO is one of the tools that central banks use to smoothen the liquidity conditions throughout the year and minimise its impact on the interest rate and inflation rate levels.