An open market operation (OMO) that involves short-term repurchase and reverse repurchase agreements (repo and reverse repo) aiming to temporarily add money (as part of the money supply) or drain reserves available to the market players in a banking system. A reverse repurchase agreement (for short, RRP) is a transaction in which a central bank (through an open market operation committee) sells securities (eligible securities such as treasury securities, agency debts, and marketable mortgage-backed securities, MBSs) to an eligible market participant with an agreement to repurchase it at a specified price at a specific time in the future.

Repo is the economic equivalent to a collateralized loan by the central bank, where the difference between the purchase and sale prices constitutes the repo interest or return. The return on a repo is the interest earned by the lender (repo buyer) in a repo transaction. It is the amount of money paid on the cash that is lent out to the borrower (repo seller) or the party posting the collateral. In essence, it is a money market rate corresponding to the repo maturity.

Under a reverse repo, the trading desk sells a collateralized security under an agreement to repurchase that security in the future. A reverse repo is the economic equivalent of collateralized borrowing by a central bank. Overnight reverse repos are represent a tool designed to help keep the federal funds rate in the target range. Temporary open market operations (temp OMOs) are meant to influence day-to-day trading in the federal funds market, and as such to provide for transitory reserve requirements. In contrast with permanent OMOs, which involve outright purchases or sales, temporary OMOs are short-term transactions.