In its April 2024 Monetary Policy Report, the RBI stated that rising global temperatures are causing more frequent extreme weather events (EWE), showing clearer economic and social impacts of global warming.

The report discusses the challenges posed by frequent weather disruptions caused by climate change. It points out that rising global temperatures are leading to more extreme weather events, impacting economic growth and creating complexities for monetary policymakers.

The report explains how climate change affects monetary policy. It directly influences inflation by disrupting agriculture and supply chains. Moreover, climate change may alter the natural interest rate and weaken the effectiveness of monetary policy tools for households and businesses.

The report highlights that central banks are increasingly incorporating climate risks into their economic models.

Additionally, reduced productivity due to climate change could lower the natural interest rate. However, persistent inflationary pressures might require tighter monetary policies, even if the natural interest rate declines.

Lastly, the report underscores that climate-related disruptions pose risks to anticipated economic growth.