MNI POLICY: Fed's Brainard Urges Climate Change Consideration

By Jean Yung

     WASHINGTON (MNI) - Climate change deserves consideration in the Federal

Reserve's setting of monetary policy as the risks are projected to have

"profound effects" on the U.S. economy and financial system, Fed Governor Lael

Brainard said Friday. 

     "To fulfill our core responsibilities, it will be important for the Federal

Reserve to study the implications of climate change for the economy and the

financial system and to adapt our work accordingly," she said in remarks

prepared for a San Francisco Fed conference on climate change. 

     It is vital for policymakers to understand the nature of climate

disturbances to the economy, including how natural disasters affect labor

markets, household and business spending, output and prices, she said. 

     Though policy should "look through" one-off shocks, policymakers need to

assess the likely persistence of the effects and how widespread they are, which

could be challenging, Brainard said. 

     To the extent that climate change affects productivity and long-run

economic growth, there may also be implications for the longer run neutral rate,

she added. Policies implemented to mitigate climate change will also affect

prices, employment and output. Uncertainty regarding climate change and the

policy response could also hold back investment and economic activity, she said.

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

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