ECB’s Villeroy: Climate Change Could Lead to Gradually Higher Inflation

2 November 2021

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Tuesday appeared to suggest that climate change could lead to gradually higher inflation.

In an interview with French weekly news magazine L’Express, Villeroy, who heads Banque de France, when asked if the adjustment to climate changes meant an era of permanently higher inflation, replied that ‘[i]f the transition involves an increase in the price of carbon, which is desirable, this will have a gradual effect on the inflation trajectory.’

He urged that the ECB not just include climate change in its forecasting models and insist that counterparties be transparent about their risk, but ‘go further and assess the value of the assets we buy or take as collateral in our refinancing operations, according to environmental and not just financial criteria.’