In the conduct of monetary policy, central banks look through temporary changes in inflation. An increase in individual prices, as we recently experienced with electricity prices, reflects shortages that monetary policy cannot, and should not, attempt to counteract. There is also a tradition in Norway for the social partners to largely look through unexpected fluctuations in prices and costs. Inflation is only likely to accelerate if broad groups, whether price setters or wage earners, demand compensation for higher costs. In that case, the central bank’s task is to tighten monetary policy. The rise in the inflation rate has come after several decades of low global inflation. Increasing international trade and competition is one important reason for the slow rise in prices in that period. High labour force growth, partly owing to labour immigration, has also had a dampening impact on wage growth in many countries. These drivers may be changing direction. We saw signs that globalisation was slowing down even before the pandemic. The pandemic may also have amplified a trend whereby an increasing number of businesses see the need to secure their own supply lines and locate more of their production chain closer to their customers. At the same time, labour supply is growing more slowly in advanced economies as the population ages. The period where some countries struggled with too low inflation appears to be over, and central banks may be facing more demanding trade-offs between meeting the inflation target and supporting employment.

The NGFS was founded five years ago on the recognition that climate-related risk is a threat to the financial system and that the financial sector can play a role in enabling the transition to a low-carbon economy. We number 140 members and observers now, comprising central banks, financial supervisors, and international financial institutions from across the world. Nature-related risks have material macroeconomic, macroprudential, and microprudential consequences. Central banks and supervisors therefore cannot afford to ignore nature and biodiversity loss. The NGFS has produced three research papers on biodiversity and financial stability, together with the International Network for Sustainable Financial Policy Insights, Research, and Exchange, or INSPIRE. The research shows that nature-related shocks can transmit to the financial system. Corporate dependencies on natural capital pose market and credit risks to individual financial institutions' portfolios, which can potentially aggregate into systemic financial exposures. The NGFS has thus created aTaskforce for Biodiversity Loss and Nature-related Risks, to help mainstream nature-related financial risks across our work on supervision, financial stability oversight, and monetary policy. The Taskforce will develop a comprehensive framework to identify the transmission channels from nature-related risks to central banking and supervisory activities. For its part, the Monetary Authority of Singapore has published environmental risk management guidelines for banks, asset managers, and insurers operating in Singapore. The Guidelines set out the expectation that financial institutions should manage environmental risks such as those arising from biodiversity loss. Finance can be a powerful force for helping to bend the curve of nature degradation.