Read the text in order to answer question. Central banks risk being taken by surprise by climate-driven shocks to global labour markets unless they restructure their approach to mo

Read the text in order to answer question.

Central banks risk being taken by surprise by climate-driven shocks to global labour markets unless they restructure their approach to monetary policy, a report published by the London School of Economics warned. The study found that, even under relatively optimistic scenarios in which global warming is limited to 1.5-2 degrees, climate change would lower labour productivity, particularly in agriculture, construction and other sectors exposed to heat.

With up to 1.2 billion workers in 182 countries vulnerable to climate disruption, the report by the Centre for Economic Transition Expertise (CETEx) urged monetary authorities to pay greater attention to environmental risks — from natural disasters to the consequences of the green transition. “Our research shows that central banks should seek to integrate environmental employment risks into their policies and operations,” said Joe Feyertag, senior policy fellow at CETEx and author of the report.

The European Central Bank and the Bank of England have highlighted the dangers resulting from climate change and its potential impact on inflation, growth and banks’ health. But the United States Federal Reserve, in many ways the world’s most influential central bank, decided to leave aclimate-focused network of authorities earlier this year, raising questions about the depth of its engagement on these issues.

The report found rich countries were most at risk from the shift away from pollution-intensive industries. By contrast, poorer regions in Africa, Asia and Latin America faced a bigger threat from physical risk such as floods and droughts. These divergent pressures, combined with demographic shifts and tighter immigration policies, could further pressure labour markets in developed countries while loosening them in emerging ones, the study said.

Feyertag also warned that labour market disruptions could amplify social inequalities, especially in countries with rigid labour markets. Inflation tends to be higher in a tighter labour market, all other factors being equal. Low productivity can also contribute to high inflation.

(Francesco Canepa and Mark Potter. www.reuters.com, 22.07.2025. Adapted.)

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