ECB’s Cipollone: Addressing Climate Change Key Question for Monetary Policy

26 May 2024

By Aurėja Bobelytė – VILNIUS (Econostream) – European Central Bank Executive Board member Piero Cipollone on Sunday said that monetary policy had to figure out how to deal with the increasing frequency of supply shocks.

Speaking in a conference in Trento, Italy, Cipollone said, ‘Looking ahead, a key question for monetary policy is how to address the risk of more frequent supply shocks, the effects of which are magnified by climate change and insufficient progress on the green transition’.

The economy has been stuck in a ‘continuous loop of crisis management’, which limited investments in the green transition, Cipollone said. Postponing the green transition would be a lot more costly than the long-term costs of climate change, he said.

‘Climate change is accelerating as we speak and it has important implications for central banks because it has an impact on inflation and the exposure to supply shocks, while lowering potential output and productivity growth. It also creates financial risks for the central bank’s balance sheet’, he said.