Federal Reserve Independence

About Federal Reserve Independence

The Treasury Federal Reserve Accord of 1951 established the operational independence of the Federal Reserve from the Treasury Department. During World War II, the Fed had been required to cap long term interest rates to help finance the war. After the war, President Truman wanted the cap maintained to keep government borrowing costs low. Fed Chairman Thomas McCabe resisted, arguing that the cap was causing inflation. The 1951 Accord, brokered by William McChesney Martin who became Fed Chairman, established that the Fed would set monetary policy independently. The Accord is celebrated as a foundational document of Fed independence. President Trumps attacks on the Fed in 2018 to 2020 revived debate about central bank independence.