ECB’s Elderson: Monetary Policy Decisions to Consider Climate Change

30 January 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Executive Board member Frank Elderson on Tuesday said that climate change was being taken into consideration in the updating of macroeconomic projections and in monetary policy decisions.

In a briefing with journalists following the release of the ECB’s climate and nature plan 2024-2025, Elderson said, ‘We are updating our macroeconomic projections to account for climate change, which the Governing Council uses to inform its monetary policy decisions.’

Despite the focus on specific instruments, the monetary policy statement also mentioned climate-related events, which was ‘new and important’, he said.

The use of categories such as green inflation did not interfere with the pursue of price stability, he said, since ‘inflation is always of our concern.’

‘This is very much on our mind, and I wouldn’t say that it has become less because of - lucky by the way - our monetary policy being effective in bringing down inflation to our medium-term target of 2%’, he added.

The ECB was ready to update its monetary policy instruments to pursue the green transition, he said.  

‘So as long as there is no prejudice to price stability, we have an obligation, when we design our instruments, to do that in a way that is as much as possible compatible with the EU climate and nature goals’, he said.

‘The ECB needs to better understand the impact of changing climate on our core tasks’, he said, adding that ‘banks, firms and other market participants have to swiftly develop transition plans to minimise lasting effects of climate and environmental risks.’