The climate crisis threatens economic stability – why are central bankers divided? | Howard Davies

Jerome Powell and Mervyn King reject taking on climate policy, while Mark Carney and Christine Lagarde say action is vital

The climate crisis has come to represent a major challenge for central banks. How much should their monetary policy and approach to banking supervision be influenced by it?

On one hand, there is growing evidence that global heating, particularly through its effect on agriculture, may create inflationary pressures. And there is even stronger evidence that the physical and transition risks created by the climate crisis are having, and will continue to have, a major impact on the value of financial assets and financial firms, which those responsible for the stability of the financial system cannot ignore.