Open Market Operations
Open market operations (OMOs) play an important role in Eurosystem’s monetary policy. In general terms, OMOs are normally executed in a decentralized manner by NCBs, on the initiative of the ECB, which decides on the instruments to be used and on the terms and condition for their execution. They can be executed on the basis of standard tenders, quick tenders or bilateral procedures.
The Eurosystem’s open market operations can be divided into the following four categories with regard to their aims, regularity and procedures :
The main refinancing operations are regularly liquidity-providing reverse transactions with a weekly frequency and a maturity of one week. These operations are executed by the national central banks of the basis of standard tenders. The main refinancing operations provide the bulk of refinancing to the financial sector. Starting from June 2000, the ECB has published its forecast of the average autonomous factors on each main refinancing operation announcement day. From March 2004, with the implementation of the new Eurosystem’s operational framework for monetary policy, the ECB has started to publish “the benchmark allotment” in the main refinancing operations on the announcement day and on the allotment day, as well as an updated forecast of the average autonomous factors on the allotment day.
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Οι The longer-term refinancing operations are liquidity- providing reverse transactions with a monthly frequency and a maturity of three months. These operations are aimed at providing counterparties with additional longer-term refinancing are executed by the national central banks on the basis of standard tenders. In these operations, the Eurosystem does not, as a rule, intend to send signals to the market and therefore normally acts as a rate taker.
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Οι Fine-tuning operations are executed on an ad hoc basis with the aim of managing the liquidity situation in the market and in particular in order to smooth the effects on interest rates caused by unexpected liquidity fluctuations in the market. Fine-tuning operations are primarily executed as reverse transactions, but can also take the form of outright transactions, foreign exchange swaps and the collection of fixed-term deposits. Fine-tuning operations are normally executed as reverse transactions, but can also take the form of outright transactions, foreign exchange swaps and the collection of fixed-term deposits. Fine-tuning operations are normally executed by the national central banks through quick tenders, although bilateral procedures can also be used. The Governing Council of the ECB will decide whether, under exceptional circumstances, fine-tuning bilateral operations may be executed by the ECB itself.
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Additionally, the Eurosystem may carry out structural operations whenever the ECB wishes to adjust the structural position of the Eurosystem against the financial sector (either on a regular or non-regular basis). Structural operations in the form of reverse transactions and the issuance of debt instruments are carried out by the national central banks through standard tenders. Structural operations in the form of outright transactions are executed through bilateral procedures.
The main and the longer-term refinancing operations are executed in accordance with the Eurosystem’s pre announced tender operations calendar.
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