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Lael Brainard. Photo: Al Drago/Bloomberg via Getty Images

Fed governor Lael Brainard is filling in more blanks about how the central bank could weigh and limit financial institutions' exposure to climate risk.

Driving the news: "I anticipate it will be helpful to provide supervisory guidance for large banking institutions in their efforts to appropriately measure, monitor, and manage material climate-related risks," she said in a speech Thursday.

  • Brainard also said the Fed is developing "scenario analysis" to model financial risks and "assess the resilience of individual financial institutions and the financial system to these risks."

Why it matters: The NYT calls the speech the "clearest signal yet" that the Fed will seriously weigh big banks' vulnerabilities. Brainard's influence may grow too.

  • Brainard is reportedly in the running to become Fed's vice chair for supervision. Randal Quarles' term ends soon.
  • Her remarks "go beyond" Quarles' positions on climate, Bloomberg reports.
  • She's also a potential candidate for Fed chair if Biden dumps Jerome Powell.

Yes, but: The speech — citing "novel combinations" of risks — is clear-eyed about uncertainties of trying to game out physical and transition risks facing financial institutions.

  • "Although we should be humble about what the first generation of climate scenario analysis is likely to deliver, the challenges we face should not deter us from building the foundations now," Brainard said.

Go deeper

Fed revamps rules for officials, restricts trades after controversies

Federal Reserve Chairman Jerome Powell. Photo: Kevin Dietsch/Getty Images

The Federal Reserve on Thursday announced significant changes to its rules regulating officials' financial activities following controversy last month over some officials' past trading practices.

Why it matters: The rule revamp is a coda to the biggest scandal to hit the Fed in recent memory.

Changing the inflation conversation

Illustration: Annelise Capossela/Axios

Inflation looks like it’ll run hot for longer than plenty of smart people thought it would. The conversation over just how much more Americans will have to pay for their stuff has taken on a new intensity, as supply problems show few signs of fading.

Why it matters: The rate of price growth has remained consistently strong in recent months — a time that some thought would bring cooling prices after an initial reopening spike. What goes on with prices will influence the decisions made by Congress, the Biden Administration, and the Federal Reserve.

"Atmospheric river" swings Northern California from drought to flood

Satellite view of the bomb cyclone swirling off the coast of the Pacific Northwest and the atmospheric river affecting California on Oct. 24. Photo: CIRA/RAMMB

A series of powerful "atmospheric river" storms are delivering historic amounts of rainfall across parts of drought-stricken California and the Pacific Northwest.

Why it matters: The atmospheric river, packing large amounts of moisture, was causing Northern California to whiplash from drought to flood, as it slowly moved south overnight. It's triggered widespread power outages, flooding and mudslides.