Open-market purchase operation

Open-market purchase operation

A systematic program of repurchasing shares of stock in market transactions at current market prices, in competition with other prospective investors.

Open-Market Purchase Operation

1. The practice of a central bank buying government-issued securities in order to control the money supply. When a central bank begins buying back previously issued debt, it indicates that the central bank believes that there is too much money in circulation, causing inflationary pressure. It buys these securities in order to reduce the amount of money circulating. While this eases inflation, it can reduce the economic growth rate. An open-market purchase operation is usually accompanied by an increase in target interest rates.

2. The act or practice of buying securities or other assets in fair competition with other potential buyers.