Open Market Operations

Open market operations (or OMA for short) are all purchase-sale operations carried out by the central bank. They are one of the monetary policy planning measures that can be carried out in an open market, accompanied by certain adjustments or modifications of the interest rate, of the exchange rate and of the bank reserve requirement and operations with the public sector and with the banking sector itself.

It is said that these types of operations are carried out (forgive the redundancy) in an "open market" or "semi-open" because the purchase or sale of public titles (or other types of titles such as semi-private ones) by the central bank is not carried out directly with the issuer of the title.

Effects on the economy

In addition to the banking reserve that obliges the banks of the system to maintain a percentage reserve in the central bank for their depositary obligations, the central bank has open market operations as an instrument monetary policy, which allows you to restrict or expand the money supply, altering the amount of bank deposits. To do this, central bank agents turn to the public market. These operations are characterized by public acceptance in the economic context and a slight instrumentalization lag compared to other monetary measures. Given these characteristics, it can be considered that OMOs in a stable economy can reduce the systematic risks of monetary planning operations...

Open market operations of the European Central Bank

The open market operations of the European Central Bank are carried out through temporary operations, in which the central bank buys assets through repo transfers or grants loans backed by a guarantee from the recipients of the loans, they are operations in which funds are provided only for a limited and pre-specified time. These operations are divided into the following categories, depending on the purpose and regularity of the operations and the procedures used:

• Major financing operations are the most important open market operations carried out by the Eurosystem, using mainly to control interest rates, manage market liquidity and point out monetary policy guidance, by setting the official interest rates of the European Central Bank.
• longer-term financing operations are regular funding operations, usually over three months, which provide longer-term additional funding to the financial sector and typically act as a interest rate acceptor.
• Adjustment operations are intended to regulate the liquidity situation of the market and to control interest rates, particularly in order to smooth the effects of unforeseen liquidity fluctuations.
• structural operations, in order to change their structural position in the face of the financial sector.