The Fed Is Running Scared of Trump

The US Federal Reserve bows to political pressure and withdraws from banking climate group, even while other central banks are stress-testing firms for climate risks.
January 24, 2025
  • The Federal Reserve’s withdrawal from the Network for Greening the Financial System (NGFS) is concerning, as it suggests the Fed may ignore growing data on climate risks to economic stability.
  • Climate change poses significant threats to financial systems, with potential GDP losses estimated between 18% by 2050 and 50% between 2070-2090 if left unaddressed.
  • Other major central banks like the Bank of England and European Central Bank are actively stress-testing firms for climate risk and imposing climate disclosure standards, highlighting the importance of addressing this issue.
  • The Fed’s decision appears to prioritize appeasing political pressure over independent, data-driven analysis – which does not bode well for effective policy-making in the face of climate challenges.

The US Federal Reserve’s leadership constantly stresses the importance of “data dependence.” Yet, in order to appease Donald Trump, the Fed has decided to ignore a huge – and rapidly growing – pile of data showing that climate risks pose a grave threat to economic and financial stability.

WASHINGTON, DC – Donald Trump is back in the White House, and the technocrats are running for cover. Trump has made clear his desire to dismantle the “deep state,” which he depicts as a shadowy network of bureaucrats who “weaponize” the “power of the state” to “persecute political opponents” and thwart their agendas.

But the professional officials, administrators, and policymakers Trump is poised to target play a critical role in government, including by advising leaders, regardless of their political leanings, on how they can achieve their goals legally and constitutionally. These officials must stand their ground.

The Federal Reserve is perhaps the most significant independent economic actor in the United States, given the scope of its monetary and supervisory responsibilities and the global importance of the US dollar. Unfortunately, rather than preparing to defend its positions and prerogatives, it has preemptively surrendered to Trump: on January 17, three days before Trump’s inauguration, the Fed Board withdrew from the Network for Greening the Financial System (NGFS).

Read the full post at Sustainability Now.

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