Climate change poses challenges for monetary policy, says RBI report

The Reserve Bank of India (RBI), in a recent Monetary Policy Report, highlighted that climate change can weaken monetary policy transmission.

Effects of Climate Change on Monetary Policy:

• Inflation: Adverse weather events disrupt agricultural production and global supply chains, affecting inflation.
• Natural Rate of Interest (NRI): Increased temperatures and extreme weather events reduce productivity, impacting the NRI.
• Overall Impacts: These climate effects influence the financial health of institutions, asset values, and economic expectations of individuals and businesses.