It is commonly believed that the Fed’s ability to control the federal funds rate stems from its ability to alter the supply of liquidity in the overnight market through open market operations. This article uses daily data compiled by the author from the records of the Trading Desk of the Federal Reserve Bank of New York over the period March 1, 1984, through December 31, 1996. The author analyzes the Desk’s use of its operating procedure in implementing monetary policy and the extent to which open market operations affect the federal funds rate—the liquidity effect. He finds that the operating procedure was used to guide daily open market operations; however, there is little evidence of a liquidity effect at the daily frequency and even less evidence at lower frequencies. Consistent with the absence of a liquidity effect, open market operations appear to be a relatively unimportant source of liquidity to the federal funds market.