Monetary Policy

Overview

As the NGFS noted it in 2019, climate change and mitigation policies will increasingly affect key macroeconomic variables for the conduct of monetary policy across many different time horizons. Since climate change could blur a central bank’s assessment of its policy space and affect the transmission channels of monetary policy, the NGFS advocates that central banks need to reinforce their analytical toolkit.

The NGFS created the Workstream on Monetary Policy to deepen the collective understanding of how climate change, and the actions designed to mitigate it, should be considered in relation to the conduct of monetary policy. The Workstream also explores what options central banks have to take into account climate-related risks and, where applicable, what options central banks have to ensure monetary policy operations are supportive of the transition to a low-carbon economy.

Over the course of its 2024-2026 work programme, the Workstream will focus on shedding light on how the macroeconomic impacts of climate change can be integrated into monetary policy decision-making and strategy within the existing mandates and monetary policy frameworks. The Workstream will also aim to continue to further build out the macroeconomic framework, modelling and toolkits used by central banks. Knowledge sharing as well as capacity building within the NGFS membership will be a priority in these regards.