It is essential that the inflation target be widely understood and visible so that citizens can hold their policy-making institutions accountable. Our monetary policy framework posits that CPI inflation will be at 2 per cent on an ongoing basis when actual output equals potential output.
The task is complicated by the fact that climate-related risks tend to be longterm risks by nature. How can we tackle them? Can we make banks undergo a climate-related stress test? Is it even possible to go beyond our traditional horizon of three to five years without sacrificing too much accuracy? I am not aiming for an answer here.