Central banks typically control monetary policy and interest rates, tweaking both to keep economic growth on track or to help an economy recover from a shock. It’s a stretch to say that a central bank has a role in determining the temperature of the earth.
And yet, that’s exactly what newly-installed ECB President Christine Largarde wants to do. She calls it “mission-critical,” which is laughable since nothing in the ECB’s stated mission relates to climate beyond the basic fact that everyone on the planet lives within the climate.
This is where German Bundesbank President Jens Weidmann enters the picture. He said on Friday that the ECB has no mandate to jump into the climate change fight.
“An active role in climate policy — or other fields of politics — could undermine our independence and, ultimately, jeopardise our ability to maintain price stability. Central bank independence is an obligation to stay focused on our primary objective.”
“Central bankers do not have the democratic legitimacy to correct political action or inaction. We were not granted independence to make the decisions that politicians are unwilling to make themselves.”
In other words, the ECB should stay in its lane. Is anyone at the Federal Reserve listening? Maybe we could send them a copy of Weidmann’s words.