There are a couple of noteworthy passages in Fed Chairman Jerome Powell’s speech delivered earlier today over in Sweden about central bank independence, such as:
[W]e should “stick to our knitting” and not wander off to pursue perceived social benefits that are not tightly linked to our statutory goals and authorities. . . [W]ithout explicit congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate-based goals. We are not, and will not be, a “climate policymaker.”
Maybe someone should pass the word down to the staff of the Fed, however, as the Fed has declared otherwise. Just last month, the Fed issued this statement:
The Federal Reserve Board on Friday invited public comment on proposed principles providing a high-level framework for the safe and sound management of exposures to climate-related financial risks for large banking organizations. Although all financial institutions, regardless of size, may have material exposures to climate-related financial risks, these principles are intended for the largest financial institutions, i.e., those with over $100 billion in total consolidated assets. The draft principles are intended to support efforts by large financial institutions to focus on key aspects of climate-related financial risk management.
We all know what happens after a federal agency issues “principles” or “guidelines”—they eventually harden into de facto enforceable regulations.
Here’s an idea: how about a Fed study of the climate impacts of runaway inflation?