Dictionary of Finance and Investment Terms: matched sale purchase transaction
matched sale purchase transaction
Federal Open-Market Committee procedure whereby the Federal Reserve Bank of New York sells government securities to a nonbank dealer against payment in federal funds. The agreement requires the dealer to sell the securities back by a specified date, which ranges from one to 15 days. The Fed pays the dealer a rate of interest equal to the discount rate. These transactions, also called reverse repurchase agreements, decrease the money supply for temporary periods by reducing dealer's bank balances and thus excess reserves. The Fed is thus able to adjust an abnormal monetary expansion due to seasonal or other factors.
