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Interest Rate Controls: The United States in the 1940s

Published online by Cambridge University Press:  03 March 2009

Mark Toma
Mark Toma
Affiliation:
Associate Professor of Economics, University of Kentucky, Lexington, KY 40506.
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Abstract

In 1942 the U.S. Treasury and the Federal Reserve agreed to keep the interest rate on long-term government bonds below a ceiling of 2.5 percent. Assuming rational expectations, the ceiling on long-term interest rates can be viewed as a government commitment to low long-run inflation. The Fed also agreed to buy and sell short-term government bonds at a below-market rate of 3/8 percent. This policy did not result in long-run inflation because it was narrowly confined to 3-month Treasury bills.

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Type
Articles
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The Journal of Economic History , Volume 52 , Issue 3 , September 1992 , pp. 631 - 650
Copyright
Copyright © The Economic History Association 1992

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