Open Market Operations

Open Market Operations refer to the manipulation of the supply of cash in the Short Term Money Market by the RBA. By manipulation this supply of cash, the RBA can influence the cash rate, leading to a changing nature of monetary policy in the medium term. To manipulate the supply of cash, the RBA can either sell or purchase second-hand government securities (CGS). By selling these CGS, it will cause the money supply in the STMM to increase, subsequently causing the cash rate to decrease. Similarly, by buying CGS, the money supply in the STMM will decrease, resulting in an increase of the cash rate.