Climate Change and the Federal Reserve
Report

Climate Change and the Federal Reserve

FRBSF, 2019

Rating

8

Recommendation

At first glance, it may be hard to connect the dots between climate change and Federal Reserve policy. Yet forecasts say that increasing environmental deterioration will have a significant impact on the US economy. In this incisive and accessible synopsis intended for financial professionals and executives, economist Glenn D. Rudebusch lays out the scope of the climate-related risks – including credit exposures, infrastructure damage and supply chain disruptions – that would challenge the Fed’s pursuit of macroeconomic stability.

Summary

The environmental impacts of damaging storms, frequent flooding, rising sea levels and excessive heat are bound to make their eventual mark on US Federal Reserve policy. The Fed will have to take into consideration the systemic, potentially catastrophic effects of climate change on the economy and the financial system.

The speed of deterioration is already straining US infrastructure and shackling growth. Researchers forecast that climate change will have reduced output by one-half of one percentage point by 2100. And the fact that greenhouse...

About the Author

Glenn D. Rudebusch is an executive vice president at the Federal Reserve Bank of San Francisco.


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