<Li> Under a currency board open market operations would be used to achieve and maintain a fixed exchange rate with relation to some foreign currency . </Li> <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 New York Reserve Bank will usually increase the money supply via a repo (effectively borrowing from the dealers' perspective; lending for the Reserve Bank). When the actual Federal funds rate is less than the target, the Bank will usually decrease the money supply via a reverse repo (effectively lending from the dealers' perspective; borrowing for the Reserve Bank). </P>

Difference between bank rate and open market operations