Monetary policy has long been guided by the traditional trinity of price stability, economic growth, and financial stability. For decades, central banks relied on models that assumed shocks were temporary and that inflation could be steered by adjusting interest rates. But climate change has emerged as a new and complex disruptor, reshaping inflation patterns, undermining growth, and exposing hidden risks in financial systems.For the Reserve Bank of India, the question is no longer whether climate change matters for monetary policy decisions—it clearly does. The challenge lies in how to integrate these risks into the framework without diluting the primary mandate of inflation control.
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