Open-market operations are the buying and selling of U.S. TREASURY SECURITIES by the FEDERAL RESERVE SYSTEM (known as the Fed) to implement MONETARY POLICY. The Fed, through the Federal Reserve Bank of New York, buys and sells securities, primarily U.S. Treasury bills, notes, and BONDS, in order to increase or decrease the financial reserves in the BANKING SYSTEM. The New York Fed trades with 40 primary dealers, who then resell or purchase securities with other financial institutions. Economies need MONEY to facilitate transactions and support ECONOMIC GROWTH. The goals of monetary policy are economic growth and price stability, and openmarket operations are the primary tool of monetary policy. The Fed uses open-market operations on a daily basis to adjust the amount of money in the economic system. When the Fed buys securities, it pays for the securities with a check, drawn on the Federal Reserve Bank. This adds money to the financial system, which banks then lend to borrowers, who spend the funds, which are in turn deposited in banks by the recipients of the checks received from the borrowers. The Fed’s initial injection of funds multiplies through the economy in a process called the demand-deposit multiplier. The simple demand-deposit multiplier is one divided by the reserve-requirement ratio—the percentage of deposits a bank is required to keep either in cash or on deposit with the Fed. When the Fed sells securities, primary dealers pay for the securities with funds, reducing the amount of money available to lend. This is called a withdrawal of liquidity in the banking system, reducing growth in the MONEY SUPPLY. Reductions in the money supply increase INTEREST RATES, in turn decreasing the DEMAND for INVESTMENT and consumer borrowing. This slows economic activity and reduces inflationary pressure. Similarly, increases in the money supply reduce interest rates, stimulating investment and consumer borrowing. Most often, the Fed is increasing the money supply through open-market operations to facilitate exchanges in an expanding economy. The Fed wants the “right” money supply, but “right” is a judgment determination, and controlling the money supply is not an exact science. The Federal Open Market Committee meets on a regular basis to review changes in ECONOMIC CONDITIONS. Open Market Committee members receive an updated “beige book” containing statistics and reports on current economic conditions to use in making decisions. After their deliberations, the committee directs the New York Federal Reserve Bank regarding open-market operations until the committee meets again.