ECB‘s Vasle: Green Transition Policies Could Affect Price Stability

22 March 2024

By Aurėja Bobelytė – VILNIUS (Econostream) – Policy measures to put economies on greener footing may also stoke inflation, European Central Bank Governing Council member Boštjan Vasle said Friday.

At a conference on green finance, Vasle, who heads the Bank of Slovenia, said that ‘green transition policies will put pressure on prices and could make it more challenging to maintain price stability.'

'Moreover, climate related shocks and disorderly green transition could hit financial institutions and reduce the flow of credit to the real economy, impairing the effectiveness of monetary policy measures', he added.

Vasle stressed the importance of moving forward in a coordinated manner when tackling climate change and its impact, and warned that any delay would make the transition yet harder.

The Eurosystem had begun to tilt its corporate bond holdings in favour of issuers with a better climate score, and would be restricting banks' use as collateral for ECB credit of assets from heavy polluters, he reminded.

However, he observed, the implementation of new policies required time.

‘I remain optimistic that the measures we have introduced recently will help to shape the framework, which will enable us to respond to new challenges’, he said.