![]() | The examples and perspective in this article may not represent a
worldwide view of the subject. (December 2019) |
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Open mouth operations are communications by a central bank that affect Central Bank interest rates. [1] They are a tool of monetary policy. The term was coined by economists Graeme Guthrie and Julian Wright in the year 2000. [2] While looking at the operations and communications of the Reserve Bank of New Zealand, these economists found that communications by the central bank had a much more significant effect on the interest rate than did Central Bank operations. Unbeknownst to most economists, [1] Open Mouth Operations let central banks change interest rates without significantly changing their daily monetary operations. Mario Draghi's 2012 statement [3] [4] that “the ECB will do whatever it takes to preserve the euro, and believe me, it will be enough”, is an example of a successful Open Mouth Operation used to lower the interest rates of Spanish government bonds: following the announcement, Spanish government bond interest rates dropped 352 basis points without the ECB having to purchase them. [1]
![]() | The examples and perspective in this article may not represent a
worldwide view of the subject. (December 2019) |
Part of a series on |
Finance |
---|
![]() |
Part of a series on |
Macroeconomics |
---|
![]() |
Open mouth operations are communications by a central bank that affect Central Bank interest rates. [1] They are a tool of monetary policy. The term was coined by economists Graeme Guthrie and Julian Wright in the year 2000. [2] While looking at the operations and communications of the Reserve Bank of New Zealand, these economists found that communications by the central bank had a much more significant effect on the interest rate than did Central Bank operations. Unbeknownst to most economists, [1] Open Mouth Operations let central banks change interest rates without significantly changing their daily monetary operations. Mario Draghi's 2012 statement [3] [4] that “the ECB will do whatever it takes to preserve the euro, and believe me, it will be enough”, is an example of a successful Open Mouth Operation used to lower the interest rates of Spanish government bonds: following the announcement, Spanish government bond interest rates dropped 352 basis points without the ECB having to purchase them. [1]