Open Market Operations - what securities can be included?
Hi all - ran into this question on the mocks and was tossing up between two answers.
Which of the following is least likely a tool used by the U.S. Federal Reserve Bank to directly influence the level of interest rates?
A. Verbal persuasion
B. Open market operations
C. Setting the rate on 30-year bonds
I guessed that C was the least likely given that verbal persuasion can kind of be a direct influence (I guess?) and that the Fed only sets the overnight rate. The answer was C, which brought up a couple of questions on my end. I get that the Fed doesn’t set the 30-year rate, but in terms of open market operations aren’t treasury securities across all maturities technically available for purchase during open market operations? The Fed could directly/indirectly influence 30-year rates in that case couldn’t it? It’s an unlikely situation, but I can’t find much information on it either way.
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