Inflation whether there is a war or not!
Speech by Isabel Schnabel, Member of the Executive Board of the ECB, in which she describes the new sources of inflationary pressures related with the transition to a green economy and the change in the energy model. She focuses on the role of monetary policy in this protracted context of high inflation to protect purchasing power and promote growth and employment.
Key findings from the report:
‑ Climateflation: linked to the costs of climate change itself, for example the rise on food prices due to an increase in natural disasters and severe weather events like droughts.
‑ Fossilflation: linked to the cost of the dependency on fossil energy sources. Fossil fuels become more expensive in any supply shock such as a real war or lower production levels. In this regard, oil and gas markets are often artificially tight, pushing up prices at the expense of energy importers, such as the euro area.
‑ Greenflation: A more subtle pressure on inflation has to do with the companies’ investments in green technologies that require significant amounts of metals and minerals, such as copper, lithium and cobalt. Rising demand of this products versus a constrained supply leads to price rises. So far, greenflation has had much less of an impact on final consumer prices than fossilflation.