Open market operations (OMO), discount rate, and reserve requirement are the three monetary policy tools which are use by the Federal Reserve.
Open market operations (OMO): This is the process in which the central bank (Federal Reserve in the U.S) sell and purchase share and security bonds so that the supply of money can be stable in the market. The purpose of OMO is to provide or accessing loans to business persons and consumers.
Discount Rate: It is rate of discount which is set by the central bank. Through this interest rate the central bank charges to the commercial bank on its loans.
Reserve Requirement Ratio (RRR): It is the amount or percentage which is set by the central bank for the commercial bank. This is the necessary percentage which is required for the commercial banks to keep in their reserve account for every time.