The Fed: Monetary Policy and Operations The Federal Reserve is tasked with monetary policy in the United States. Its operations affect interest rates, bond rates, the amount of currency available and the dollar’s exchange rate against other currencies. The tool most often used by the Fed to accomplish its tasks are called open market operations. In open market operations, the Fed buys or sells US government bonds. It does so through reserve accounts for the banks that sell these securities. The effect of this operation is that it ‘creates’ more money by adding to a banks reserve account. The trickle down is that these banks now have more money to lend; putting downward pressure on interest rates as the supply of money available increases.