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Liquidity auctions (Open market operations)

Monetary policy is implemented through open market operations in order to balance any lack of or excess liquidity in the accounts that banks hold in Banco de México. These imbalances result from the transactions held between banks and Banco de México (demand for bills and coins; buying/selling of foreign currency; and, transactions between depositary institutions and the federal government's account in Banco México, among others). If open market operations where not carried out, any excess or lack of liquidity would affect the conditions in the money market. Depending on each particular day's conditions, Banco de México can auction credits (provide liquidity) or deposits (withdraw liquidity).