On 4 March 1951 the Treasury-Federal Reserve Accord separated the two on monetary policy. It restored the Federal Reserve's power to set interest rates without interference from the Treasury. It also said government debt management and monetary policy need to be separate.
The American Bar Association article that records the Accord describes open market operations in the next point. Those operations are the Federal Reserve buying and selling government securities in the open market. The same article says the Federal Open Market Committee sets the federal funds rate. That rate is what financial institutions pay to lend excess reserves to each other overnight.
The article was published on 11 February 2022.
| | Debt management | Monetary policy | | --- | --- | --- | | What the Accord said on 4 March 1951 | Keep this job separate from monetary policy | The Federal Reserve sets interest rates without Treasury interference | | Open market operations in the same article | The Accord sentence does not call this debt management | The Federal Reserve buys and sells government securities | | The rate the article names | The Accord sentence does not name a rate | The federal funds rate, set by the FOMC, for overnight loans of excess reserves |
Debt management and monetary policy are the two jobs the Accord kept apart. Buying and selling government securities is the open-market operation in that article.
Sources
- Ashley Kloenhamer, American Bar Association GPSolo, 11 February 2022, the Treasury-Federal Reserve Accord of 4 March 1951, open market operations, and the federal funds rate, ABA