Fed is not, ‘will not be,’ climate change cop, board chair vows before Swedish audience

The Federal Reserve is not, “and will not be,” a “climate policymaker,” the chairman of the agency’s board told a conference in Sweden early Tuesday

In a speech to the Symposium on Central Bank Independence at Sveriges Riksbank inStockholm, Fed Board Chair Jerome H. Powell was clear that the agency’s focus would be solely on the mandates the agency has been given by Congress: maximum employment and price stability.

He said without 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.”

However, Powell said his view is that the agency possesses narrow, but important, responsibilities regarding climate-related financial risks. “These responsibilities are tightly linked to our responsibilities for bank supervision,” he said. “The public reasonably expects supervisors to require that banks understand, and appropriately manage, their material risks, including the financial risks of climate change.”

Powell told the group that it is essential that the agency stick to its mandate and “resist the temptation” to broaden its scope to address “other important social issues of the day.” He indicated that is the purview of Congress.

“Addressing climate change seems likely to require policies that would have significant distributional and other effects on companies, industries, regions, and nations,” Powell said. “Decisions about policies to directly address climate change should be made by the elected branches of government and thus reflect the public’s will as expressed through elections.”

Panel on “Central Bank Independence and the Mandate—Evolving Views”

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