Editing Interest (section)

===Open market operations in the United States===
[[Image:Federal funds effective rate 1954 to present.svg|thumb|right|375px|The effective federal funds rate charted over more than fifty years{{Citation needed|date=November 2011}}]]
The [[Federal Reserve]] (Fed) implements monetary policy largely by targeting the [[federal funds rate]]. This is the rate that banks charge each other for overnight loans of [[federal funds]]. Federal funds are the reserves held by banks at the Fed.

[[Open market operations]] are one tool within monetary policy implemented by the Federal Reserve to steer short-term interest rates. Using the power to buy and sell treasury [[Security (finance)|securities]], the Open Market Desk at the [[Federal Reserve Bank of New York]] can supply the market with dollars by purchasing [[United States Treasury security#Treasury note|U.S. Treasury notes]], hence increasing the nation's money supply. By increasing the money supply or [[Aggregate Supply of Funding]] (ASF), interest rates will fall due to the excess of dollars banks will end up with in their reserves. [[Excess reserves]] may be lent in the [[Federal funds|Fed funds]] market to other banks, thus driving down rates.