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Now, after the war ended, the US Treasury wanted to keep interest rates low to reduce the US government's borrowing costs.

But the Fed actually pushed back.

They argued that keeping rates too low for too long would cause inflation to spiral out of control.

And this led to a major turning point in 1951 called the Accord.

freed the Fed to use monetary policy independently without being forced to support the U.S.

Treasury.

See, before this, the Fed was basically taking orders from the Treasury Department, but the accord finally separated them, establishing the Fed's independence.

That allowed the Fed to set interest rates based on economic data and not what the Treasury Department wanted or what the president wanted.

And it's this accord that is considered the birth of the modern Fed independence.

Now, the next major shakeup for the Fed came in the 1970s.

This was a time of great inflation, and the Fed's independence was tested.

See, during the 1970s, the Fed kept interest rates low to boost employment.

But keeping interest rates too low can cause inflation, and that's exactly what happened.

Inflation climbed to double digits in the 1970s.

But here's the thing, a part of the reason the Fed kept rates low was because of political pressure.

At the time, President Richard Nixon leaned heavily on Fed Chair Arthur Burns to keep rates low heading into the 1972 election.

Arthur Burns gave in and inflation just got out of control.

And that's the exact nightmare scenario an independent Fed is supposed to prevent.

So this disaster of the 1970s led to major reforms of the Fed.

In 1977, Congress passed the Federal Reserve Reform Act.