According to the French politician currently President of the European Central Bank (ECB), Christine Lagarde, the searing inflation in Europe can be blamed on climate change. During his interview with Madame Figaro, Lagarde underlined that it is necessary to take into account that “climate disasters” have a great impact on price stability.
ECB Executive Board Member Isabel Schnabel says inflation prevents central banks from controlling price pressures — Christine Lagarde insists climate change must be taken into account
Last June, Eurozone inflation was 8.6% and the following month in July, the European inflation rating jumped even higher to 8.9%. While Federal Reserve Chairman Jerome Powell pledged on Friday to bring inflation under control, ECB Executive Board member Isabel Schnabel and Banque de France Governor Francois Villeroy de Galhau told the press a greater “sacrifice” is needed to curb the rise in inflation in Europe.
“Central banks are likely to face a higher sacrifice ratio compared to the 1980s,” Schnabel said on Friday. “Even if prices were to react more strongly to changes in domestic economic conditions, because the globalization of inflation makes it harder for central banks to control price pressures,” added the ECB executive board member.
Meanwhile, a recent Madame Figaro interview featuring ECB President Christine Lagarde shows that the central bank leader believes inflation in Europe may come from climate change.
Largarde is not the only person to have linked inflation to alleged long-term changes in temperatures and weather patterns around the world. On August 15, the New York Times published an editorial on how specific policies can fight inflation while fighting climate change. The Biden administration is following the same trend, as the recently implemented bill, called the Inflation Reduction Act, purports to reduce inflation by tackling climate change.
Largarde wholeheartedly believes that climate change has affected price stability and she noted that further weather disasters could harm the global economy. “If more and more climate disasters, droughts and famines occur in the world, there will be repercussions on prices, on insurance premiums and on the financial sector,” Largarde insisted during the meeting. interview with Madame Figaro (English translation here). The head of the ECB added:
We have to take that into account.
Europe is grappling with rising energy costs linked to the war between Ukraine and Russia, but a number of media publications insist that “extreme heat in the United States, Europe and China is hitting economies around the world and worsening inflation”. Analysts also speculate that Europeans could face an extremely harsh winter when the seasons change. During Largarde’s interview published on August 25, the ECB President was asked if she bore “a weight of responsibility” in the face of Europe’s economic gloom.
“Yes, absolutely,” Largarde remarked during his interview with the French outlet. “I continue to shop at the supermarket, pay my own bills, including my gas bills, and meet people at the market, as life here at the ECB can be a bit withdrawn, disconnected and punctuated by role models and of econometric projections. I move forward with a sense of duty and humility.
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