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Article: The Treasury-Fed Accord: A New Narrative Account.
- Article from:
- Economic Quarterly
- Article date:
- January 1, 2001
- Author:
CopyrightCOPYRIGHT 2001 Federal Reserve Bank of Richmond. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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The fiftieth anniversary of Federal Reserve Independence Day was March 4, 2001. After World War II ended, the Fed continued its wartime pegging of interest rates. The Treasury-Fed Accord, announced March 4, 1951, freed the Fed from that obligation. Below, we chronicle the dramatic confrontation between the Fed and the White House that ended with the Accord. [1]
1. THE CHALLENGE TO THE TREASURY
In April 1942, after the entry of the United States into World War II, the Fed publicly committed itself to maintaining an interest rate of 3/8 percent on Treasury bills. In practice, it also established an upper limit to the term structure of interest rates on ...