Post-War Progress: 1946–1960

Abstract

The post-war era saw rapid recovery, low unemployment and a struggle for central bank independence. Central banks kept interest rates artificially low at the behest of their governments. An accord reached between the US Treasury and the Federal Reserve in 1951 partially restored the central banks’ independence. Informally considered to be ‘independent within the government,’ the Fed embarked on a more active monetary policy. The nationalized Bank of England, enjoying little independence, concentrated on keeping markets orderly. Germany followed a very different approach. Helped by its Allied occupiers, it established a central bank with a high degree of independence. Known as the Bundesbank, it reflected the general German stability orientation. It became a full-fledged sparring partner of the government on interest rates and the exchange rate. Toward the end of the post-war years, European central banks were accumulating large dollar reserves and started complaining of importing inflation from the United States.