Money Market Operations

Money market operations involve the buying and selling of short-term financial assets by central banks and financial institutions to manage liquidity and stabilize the economy. Central banks, like the Federal Reserve, use these operations to influence interest rates and ensure enough cash is available in the banking system. For example, they may lend money to banks or purchase securities to inject liquidity, or they might sell securities to withdraw excess funds. These activities help maintain financial stability, control inflation, and support economic growth, functioning as a key tool for monetary policy.