However, a monetary policy that aims in all situations to keep inflation at 2% can lead to large fluctuations in output. If monetary policy was to counteract price increases in CPI which are deemed to be temporary and not a consequence of excess demand, interest rates must be kept sufficiently high to hold down demand in the economy. Output would then be under the long-term trend level. Correspondingly, with the target of achieving 2% inflation, monetary policy must stimulate demand and press output up above the long-term trend level if inflation was held down by factors that temporarily dampen prices. There are therefore reasons for modifying the monetary policy rule of conduct to make it possible to achieve balance between variations in inflation and in growth. Excessively large fluctuations in output can entail high economic costs. Fundamentally, after all, the reason for monetary policy being given the task of maintaining stable prices is that this is the way in which it is considered to make the best contribution to creating the prerequisites for high, stable growth. If inflation is affected by temporary factors or if the economy is affected by such extensive disturbances that it can be difficult to bring inflation back on target within one to two years, there may therefore be reasons to bring inflation back to target more slowly than usually. However, we should give reasons for doing this.
Whereas in previous years it barely registered as a risk, now close to a third of global CEOs are ‘extremely concerned’ about the threat climate change poses to their organisation’s growth prospects. 4  A transition in action So how far is this transition in thinking translating into action? First, governments. In reaching agreement in Paris, global leaders took political action to mitigate the catastrophic impact of climate change. They committed to curbing carbon emissions to limit the rise in global average temperatures relative to those in the pre-industrial world to 2°C, and to pursue additional efforts to limit the temperature increase to 1.5°C. Governments are taking some of the necessary policy actions. For example, in the UK, the Government published its Clean Growth Strategy last year, including policies to make homes, businesses and transport more energy efficient, and to lower the carbon intensity of the UK’s energy supply. EU Emissions Trading Scheme (ETS) reforms agreed last year, and due to come into effect from 2021, have driven carbon prices above € per tonne for the first time in six years. Even so, the national determined contributions towards meeting the Paris goals, summed to no more than 2.7°C, making it clear climate policy will need to tighten further if the Paris commitments are to be achieved. 3  It also sees $ trillion of investment in clean energy technologies and energy efficiency – and the share of oil and coal in power generation falls to 6%, which is burned with accompanying carbon capture and storage technology.