Climate change a growing concern for monetary policy: RBI

Reserve Bank of India (RBI) has highlighted challenges posed by climate change to monetary policy and economic growth, central bank said in its latest Monetary Policy Report.

According to report, escalating frequency of extreme wear events (EWE) due to global warming presents a hurdle for monetary policymakers. increasing occurrence and severity of wear shocks directly impact inflation by disrupting agricultural production and global supply chains. ditionally, climate change has potential to alter natural rate of interest and weaken transmission of monetary policy measures to households and businesses.

Recognising se risks, central banks worldwide are increasingly integrating climate-related factors into ir analytical frameworks. Without equate climate mitigation measures, RBI warns that long-term economic output could decline by up to 9 per cent by 2050 compared to a scenario with no climate change, resulting in lower productivity and a potentially reduced natural rate of interest.

Furrmore, report highlights verse impact of frequent wear-related disruptions on economy's growth trajectory, posing downside risks to economic stability.

(With PTI inputs)