Is inflation due to climate change?

Inflation reached 8.6% in June 2022 for the euro area. The following month, this rate rose to 8.9%. Admittedly, Jerome Powell, the chairman of the Federal Reserve, has promised to work to control inflation. But the situation remains very worrying. And Christine Lagarde recently made a surprising statement on the subject.

Climate disasters would affect “price stability”

According a tweet from Bitcoin News on August 28, “Christine Lagarde stressed that it must be taken into account that climatic disasters greatly affect price stability“. Indeed, the current President of the European Central Bank (ECB) made this statement during an interview with Madame Figaro. On August 15, the New York Times also established a link between inflation and climate change.

Indeed, the magazine had indicated how politicians could fight rising prices by fighting climate change. The Biden administration is apparently following the same logic with its recent bill (Inflation Reduction Act). This project aims to reduce inflation by combating climate change.

That said, an ECB board member, Isabel Schnabel, recently made a statement on inflation. According to the latter, central banks find it more difficult to control the pressure on prices because of the globalization of inflation. She claimed that “central banks are likely to face a higher sacrifice ratio than in the 1980s“.

According to Christine Lagarde:If more and more climatic disasters, droughts and famines occur in the world, there will be repercussions on prices, on insurance premiums and on the financial sector.“. And according to François Villeroy de Galhau (Governor of the Banque de France) and Isabel, inflation could be curbed in Europe. But, this will require a significant “sacrifice”.

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