NextFin news, Kevin Stiroh, the former top-ranking Federal Reserve official responsible for overseeing climate risk, stated on Thursday, October 9, 2025, that the US economy is likely to experience a series of long-term, structural shocks caused by increasingly extreme weather events.
Stiroh, who left the Federal Reserve earlier this year after the central bank scaled back its climate risk monitoring efforts, emphasized that these shocks will materialize in the balance sheets and income statements of banks and financial institutions. He highlighted that the growing frequency and severity of extreme weather—such as hurricanes, floods, and droughts—pose significant risks to economic stability.
The warning comes amid rising concerns about the financial sector's exposure to climate-related risks. Stiroh's comments underscore the challenges that extreme weather events present to the US economy, including disruptions to supply chains, damage to infrastructure, and increased insurance and credit risks.
Stiroh's tenure at the Fed included leading efforts to assess how global warming impacts financial stability. However, in May 2025, the Federal Reserve disbanded several groups focused on climate risk, signaling a shift in its approach to monitoring these threats.
Experts like Stiroh argue that despite the Fed's reduced focus, financial institutions must prepare for the economic fallout from climate change. The structural shocks he refers to are expected to be secular, meaning they will persist over a long period and fundamentally alter economic conditions.
His remarks highlight the importance of integrating climate risk into financial decision-making and regulatory frameworks to mitigate potential economic disruptions caused by extreme weather.
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