Monetary Accord of 1951


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Monetary Accord of 1951

An agreement between the U.S. Treasury and the Federal Reserve that restored the Reserve's independence. During World War II, the Federal Reserve agreed to keep interest rates on Treasury bills very low in order to monetize the deficits the United States experienced because of the war effort. Following the war, the Treasury expected the Fed to keep rates low to further support the deficit. However, this caused inflation and many in the Fed wanted to raise interest rates. The Accord allowed it to do so.