Climate-related risks are not playing a major role in the setting of Federal Reserve interest-rate policy at the moment, said Fed Chairman Jerome Powell on Friday.
“Today, climate change is not something that we directly consider in setting monetary policy,” Powell said, at an international conference on climate change and the financial sector.
Powell said the Fed is exploring climate-related implications for its responsibilities on bank supervision and financial stability.
Powell said that there is no doubt that climate change has the potential to change the structure of the economy over time. He said it was “deeper” that just inflation and could affect “the industrial organization of the economy, labor market dynamics, productivity, [and] the financial sector.”
“All of those things can affect employment, inflation and interest rates over time,” he noted.
Asked if the Fed could be a “cheerleader” to awaken public consciousness, Powell replied the Fed can play a role to build the data and analysis needed to help understand the macroeconomic consequences of climate change and quantify the risk to the financial system.
“We are not, and do not seek to be, climate policy makers as such,” he added.