This adjustment of total supply of reserve balances available to commercial banks is carried out primarily through open market operations (OMO) where government bonds or other securities are exchanged for reserves. The OMO is largely conducted by arranging overnight repurchase (repo) auctions with primary dealers.
Besides OMO, credits provided by the Fed to banks at a rate higher than the federal funds rate – called discount rate – play an important role in the implementation of monetary policy. Credits are provided under two programmes, viz., primary credit and secondary credit.