<Li> Under a gold standard, notes would be convertible to gold, and so open market operations could be used to keep the value of a fiat currency constant relative to gold . </Li> <Li> A central bank can also use a mixture of policy settings that change depending on circumstances . A central bank may peg its exchange rate (like a currency board) with different levels or forms of commitment . The looser the exchange rate peg, the more latitude the central bank has to target other variables (such as interest rates). It may instead target a basket of foreign currencies rather than a single currency . In some instances it is empowered to use additional means other than open market operations, such as changes in reserve requirements or capital controls, to achieve monetary outcomes . </Li> <P> In the United States, as of 2006, the Federal Reserve sets an interest rate target for the federal funds (overnight bank reserves) market . When the actual federal funds rate is higher than the target, the Federal Reserve Bank of New York will usually increase the money supply via a repurchase agreement (or repo), in which the Fed "lends" money to commercial banks . When the actual federal funds rate is less than the target, the Fed will usually decrease the money supply via a reverse repo, in which the banks purchase securities from the Fed . </P> <P> In the United States, the Federal Reserve most commonly uses overnight repurchase agreements (repos) to temporarily create money, or reverse repos to temporarily destroy money, which offset temporary changes in the level of bank reserves . The Federal Reserve also makes outright purchases and sales of securities through the System Open Market Account (SOMA) with its manager over the Trading Desk at the New York Reserve Bank . The trade of securities in the SOMA changes the balance of bank reserves, which also affects short - term interest rates . The SOMA manager is responsible for trades that result in a short - term interest rate near the target rate set by the Federal Open Market Committee (FOMC), or create money by the outright purchase of securities . More rarely will it permanently destroy money by the outright sale of securities . These trades are made with a group of about 22 banks and bond dealers called primary dealers . </P>

The purchase of short term bills from the general public by the central bank will