What is a central bank’s purchase of government securities to increase the money supply called?

A central bank’s purchase of government securities to increase the money supply is called an open-market operation.

When a central bank buys securities from financial institutions or other market participants, it pays by adding reserves to the banking system. Those additional reserves can support lending and place downward pressure on short-term interest rates, depending on the central bank’s operating framework and the demand for credit. Selling securities generally has the opposite effect.

Open-market operations are a monetary-policy tool, so they differ from fiscal policy, which involves government taxation and spending. They also differ from quantitative easing, a term commonly used for large-scale asset purchases, especially when short-term interest rates are already very low. Quantitative easing can include longer-term securities and has a broader policy context.

The exact mechanics vary by country. The Federal Reserve, the European Central Bank, and other central banks use different systems, but the core idea is central-bank trading in financial markets to influence liquidity and interest rates.