Change is afoot at the Reserve Bank of Australia. This week the Treasurer announced Michele Bullock will take over from Philip Lowe as Governor of the RBA. Lowe had faced mounting political heat after he abandoned forward guidance given as late as November 2021 that interest rates would not rise until 2024 and joined central banks around the world in rapidly hiking interest rates.
One of Bullock’s first tasks will be to oversee the implementation of the recommendations of the Review into the RBA released in March 2023. Most attention about the Review has focused on its proposed structural changes to the RBA, which would create separate boards for monetary policy decisions and institutional governance. This change will bring the RBA in line with many of its international peers. Last week, outgoing Governor Philip Lowe announced initial steps towards implementing this recommendation.
But in one important area, the Review’s recommendations will leave Australia’s central bank falling behind many of its international peers. The Review considered whether the RBA should play a more active role in climate policy. Although the Review affirmed the RBA’s recent moves to incorporate climate risks in its analysis of the economy and the financial system, it explicitly recommended against the RBA using its monetary policy powers to reduce the risks of climate change [...]
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