To be or not to be ‘green’, part 1: Why climate change is relevant for monetary policy
While the implications of climate change for financial stability and prudential supervision are widely recognised, those for monetary policy have received less attention until recently. This column, the first in a two-part series, reviews the key mechanisms through which climate change influences monetary policy. Climate change impacts the objective, conduct, and transmission of monetary policy and could bear implications for the design of the monetary policy framework. To ensure price stability, central banks have a clear interest, in some cases an obligation, to incorporate climate change considerations into their policymaking.