Federal Reserve Chairman Jerome Powell said Friday that climate change is not a main consideration for the central bank when formulating monetary policy.
Speaking on a panel of his global colleagues, the head of the U.S. central bank said taking on issues related to global warming is more for the government than for his institution.
“Today, climate change is not something that we directly consider in setting monetary policy,” Powell told the Green Swan conference presented by the Bank of International Settlements. “We’re quite actively exploring exactly what climate implications are for our supervisory, regulatory and financial stability responsibilities.”
In recent months, the Fed has taken a more active role in climate change, with the creation of two internal committees aimed at exploring the issue and by joining the global Network for Greening the Financial System.
However, Powell made clear that the institution’s role in the matter is limited to oversight of banks and the rest of the financial system, and not in setting public policy. He added that “there’s a lot to like” about stress-testing banks for climate-related issues, but he did not commit to a specific program.
“At the Fed, we see our role as an important one that is tied tightly to our existing mandate,” he said. “Our mandate hasn’t changed. We haven’t been assigned a role in setting overall policy. We don’t have a secondary mandate to support the economic policies of the government.”
The Fed has faced criticism from some quarters, particularly congressional Republicans, for overstepping its dual mandate of full employment and price stability.
But Powell said “we view climate-related financial risk” as falling under “our existing mandate for bank supervision and financial stability.”
His comments at Friday’s session contrasted with some of his fellow central bank chiefs who have more expansive mandates.
European Central Bank President Christine Lagarde said taking a stand on climate is central to her institution’s mission.
“Our planet is burning, and we central bankers could look on our mandate and pretend that it is for others to act and that we should simply be followers. I don’t think so,” she said.
Lagarde suggested that the ECB may consider climate change in its corporate bond purchases. By contrast, the Fed only bought company debt during the Covid-19 pandemic and announced this week that it will begin unwinding the modest portfolio it accumulated during the program.
