Bank of England Governor Andrew Bailey vowed to press ahead with work to assess climate-related risks to the economy, brushing off criticism that officials have been distracted from their fight against inflation.
Bailey said the UK central bank still has an “important role” in helping to protect steel the financial system from climate risks. Its primary goal is to keep inflation to 2%, a goal it hasn’t met in almost two years.
The governor did not address shock inflation figures released on Wednesday morning that showed price pressures are proving stickier than the BOE expected. However, he is likely to be questioned on the surprisingly strong inflation reading for April later today during an appearance at the Wall Street Journal CEO Council Summit.
“One of those headwinds is that we are facing supply shocks as we transition from the Covid challenge,” Bailey said at the Mansion House Net Zero Delivery Summit on Wednesday. “But in the midst of those headwinds, I think it’s important and events like today are so important that we recognize that our future in respect to tackling climate risk is dependent on the actions we take now. So we will continue to address the impacts of climate change.”
He said the “economy and financial system are not immune from playing their part” in the net zero transition.
His comments comes after a slew of criticism of the BOE’s role in tackling climate change from former central bank officials. Some have warned that the BOE has become sidetracked from its battle to rein in painfully high inflation by extra goals.
Former BOE Chief Economist John Vickers and a previous deputy governor, Paul Tucker, warned in testimony to the House of Lords in March of the risk of the BOE being given too many objectives, taking its focus away from inflation.
“It does burnish the central bank’s green credentials, which individuals there might welcome, but it dilutes the sense that they are focused on inflation control,” said Vickers. “There could be some cost to that.”
Tucker said, “the bank is involved in too many things beyond its core remit,” adding later in the hearing that, “it is being asked or encouraged to do too much, and that risks distracting it from the core mission.”
Read more:
- UK’s Stubbornly High Inflation Fuels Bets for Higher Rates
- Bank of England Will Cut Spending for Its Work on Climate Change
- BOE Distracted From Crisis by Climate Goal, Two Ex-Officials Say
(Updates with details on Tucker and Vickers in final three paragraphs.)
