Gabriel Makhlouf: Climate change - avoiding the "Do I Feel Lucky?" school of policymaking

Remarks by Mr Gabriel Makhlouf, Governor of the Central Bank of Ireland, at Chatham House's Waddesdon Club of Financial Leaders, Dublin, 1 June 2022. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

Good evening everyone and thank you for the opportunity to speak to you today.

I want to start by reminding us all of what Ernest Hemingway wrote, when one of the characters in his novel The Sun Also Rises was asked how he became bankrupt.  Two ways was the reply, gradually and then suddenly. In a similar vein, Rudiger Dornbusch, a well-known economist, said, when talking about Mexico's currency crisis in the mid-1990s, that "the crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought".¹

On the face of it, that probably applies to most financial crises and not just currency ones.  And perhaps it has application elsewhere.

I will return to Hemingway and Dornbusch later.

When it comes to climate change, there has been considerable debate about the role of central banks.  Questions have been asked about whether actions on climate change would interfere with their legal mandate, or indeed if central banks would be reaching into areas that should only be addressed by democratically elected officials.

In my view, a broad consensus has now been reached: climate change is affecting the capacity of central banks to meet their core and secondary mandates, be that price and financial stability, or in some cases also supporting broader economic policies.  So central banks have to play a role in tackling the climate challenge, along with all actors in society, but the time for that action is running out.