Climate change is transforming our economy as rapidly as it is transforming our planet—but you wouldn’t know that from the Federal Reserve’s Jackson Hole convening last weekend. As expected, Chair Jerome Powell made no mention of climate change in his highly anticipated Friday speech. More disappointingly, not a single paper that focused on the impact of climate on the macroeconomy was selected for the mini academic conference that followed. In a new blog post, Roosevelt’s Kristina Karlsson and Sarah Bloom Raskin—former deputy treasury secretary and new Roosevelt senior fellow—explain what the conversation was missing and offer a reading list to fill those gaps.
Federal Reserve governors—along with the broader macroeconomic community—should realize that many of the supply constraints that led to inflation “were driven by extreme weather and volatile energy markets,” Karlsson and Bloom Raskin write. Climate has already touched the economy by reducing crop yields, desertifying land, harming workers, and disrupting shipping. “Acknowledging the reality of climate and transition risks is well within the Fed’s mandate, and in fact critical to upholding it.”Â
Their essential reading recommendations include reports on the relationship between price volatility and climate-related factors by authors at the European Central Bank, the Joint Research Centre of the European Commission, and the University of Massachusetts Amherst.Â
“It’s imperative that a central bank read the latest research and conduct its own analysis on climate and transition risks—as a start—and follow up by integrating that analysis into its monetary policy practice,” Karlsson and Bloom Raskin write.
Read more in “The Fed Needs to Catch Up on Climate Risk Research. Here’s Where to Start.”
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