From the IPCC’s work, we know that the physical risks related to climate change will grow over time, while the transition risks will depend in part on how abruptly policy, technology, and behavioral changes take place. Since financial markets are forward looking, a change in expectations regarding climate-related risks could lead to a sharp repricing of assets at any time.
If one is sufficiently worried about this downside risk, then prudent risk management would suggest skipping a hike at the June meeting but leaning toward hiking in July based on the incoming inflation data. There is a little over a month between the June and July FOMC meetings, and during that time we will learn more about how credit conditions are evolving.