By Michael S. Derby
NEW YORK (Reuters) - Early next month, the Federal Reserve Bank of New York will take on what has become something of a fraught subject for the central bank: climate change.
Starting on Nov. 8 it will begin publishing a string of reports detailing the impact of “extreme weather events” on economic activities in its district, which includes New York, parts of New Jersey and Connecticut and some U.S. island territories like Puerto Rico, as well as the nation as a whole, the bank said on Wednesday.
“With the frequency and ferocity of extreme weather events –including flooding, storms, and heatwaves – increasing in recent years, the research will help to understand the effects of these climate events on the economy and financial markets,” the bank said in a press release.
The New York Fed said the reports, which it will release through Nov. 20, consider flood and hurricane risks, extreme weather impacts on small businesses and disadvantaged communities, and on how businesses are adapting to this landscape.
The New York Fed foray into the topic comes as the central bank has retreated from the climate issue after facing heat from some members of Congress. In recent years, the Fed had been engaging with climate changes issues in terms of how they’d affect financial stability and overall economic activity, both areas that go to the core of the Fed’s legal mandate.
Some Fed officials even began to weigh in as to how climate change disruptions might impact monetary policy decision making. Meanwhile, the central bank formally joined in late 2020 with other major central banks in efforts to shore up the financial system against climate-related disruptions.
Some in Congress have seen the Fed’s climate work as a sign of a politicized central bank. Some academics even argued there's been a measurable increase in Fed research tackling environmental, social justice and economic inequality issues, as opposed to more traditional focuses on things like inflation dynamics.
In recent comments, officials like Fed Chair Jerome Powell have said the Fed’s role in climate policy is limited and largely contained to financial stability considerations, where banks and other financial firms face big and rising challenges.
That said, the Fed has not ruled out thinking about how climate disruptions affect the full measure of the economy.
“You can't be blind to the fact that climate change could affect the economy,” Cleveland Fed leader Loretta Mester said in an appearance in New York on Friday.
Speaking two days earlier, New York Fed President John Williams said “with increased frequency and severity of climate events, that's going to have big impacts on local economies and national economies.”
“We have responsibilities for monetary policy, we need to understand how the economy is performing,” Williams said in an appearance at Queens College. “Climate change is fundamentally an important factor in understanding the local economy, the national economy and importantly, the global economy.”