The Conversation, November 2023
Climate disasters are now costing the United States US$150 billion per year, and the economic harm is rising. The real estate market has been disrupted, as home insurance rates skyrocket as wildfire and flood risks rise with the warming climate. Food prices have gone up with disruptions in agriculture. Health care costs have increased as heat takes a toll. Marginalized and already vulnerable communities that are least financially equipped to recover are being hit the hardest.
Despite this growing source of economic volatility, the Federal Reserve – the U.S. central bank that is charged with maintaining economic stability – is not considering the instability of climate change in its monetary policy. Earlier this year, Fed Chair Jerome Powell declared unequivocally: “We are not, and we will not become, a climate policymaker.”
Powell’s rationale is that to maintain the Fed’s independence from politics and political cycles, it should use its tools narrowly to focus on its core mission of economic stability. That includes price stability, meaning keeping inflation low and maximizing employment. In Powell’s view, the Fed should stay away from social and environmental concerns that are not tightly linked to its statutory goals.