Open market operations are conducted under the direction of the Federal Open Market Committee (FOMC) and consist of the trading of securities with primary dealers. The bank rate is the interest rate that the Federal Reserve sets for loans to other banks, and the reserve requirement is the minimum amount a bank must have in its vault for deposit withdrawals. Among these three tools, the Federal Reserve has primarily used open market operations because it is the most flexible monetary policy tool and it allows the FED to influence the federal funds rate, which is the rate at which banks borrow from each other. Open market operations are the fastest and most effective way to influence the economy. A simple breakdown is this: The FED buys securities from banks, which injects money into the banks, allowing them to lend more. The injection of money lowers interest rates, making it easier to obtain credit, which increases spending and economic activity expands. Conversely, if the FED sells the securities back to the banks, it takes money out of the system, which increases interest rates, thereby reducing economic activity. The direct discount rate is often followed by other interest rates. Therefore, if drastic changes to the Direct Bank Rate were made, it would mean that interest rates would follow, which could have a negative effect.