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Mervyn King

The Looming Test for Central Bank Independence

Imagine “Yellen,” the musical.



Photographer: Jessica McGowan/Getty Images

In the first two columns in this series, I asked what the pandemic meant for short-term fiscal policy and, looking farther ahead, for measures to accommodate structural shifts in our economies. This time I’ll ask what it means for monetary policy — and the starting point is to look back at a key moment in history.

March 4 is the 70th anniversary of the Treasury-Federal Reserve Accord, the agreement that re-established the central bank’s independence and has underpinned it ever since. In subsequent years, the idea of central bank independence spread across the developed world. But will it survive?