{"id":60827,"date":"2022-07-18T07:00:00","date_gmt":"2022-07-18T06:00:00","guid":{"rendered":"https:\/\/www.lse.ac.uk\/granthaminstitute\/?post_type=publication&p=60827"},"modified":"2024-08-19T14:26:34","modified_gmt":"2024-08-19T13:26:34","slug":"the-european-central-banks-strategy-environmental-policy-and-the-new-inflation","status":"publish","type":"publication","link":"https:\/\/www.lse.ac.uk\/granthaminstitute\/publication\/the-european-central-banks-strategy-environmental-policy-and-the-new-inflation\/","title":{"rendered":"The European Central Bank\u2019s strategy, environmental policy and the new inflation: a case for interest rate differentiation"},"content":{"rendered":"\n

How the European Central Bank (ECB) raises interest rates this year will shape the European economy for the next few decades. In particular, a sharp rise in funding costs could potentially gravely harm investments needed today for clean energy production, energy efficiency and adaptation to increasingly extreme weather and environmental degradation. Cutting off investments now would make the EU economy more vulnerable to geopolitical and climate-related inflationary shocks.<\/p>\n\n\n\n

This report draws attention to some of the important lessons learned from the past few decades regarding the economic pre-conditions for price stability, as contained in the ECB’s 2021 strategy.<\/strong> The report revisits lessons learned on the interaction between monetary policy and sovereign debt markets. For private sector investments, it focuses in particular on interest rate differentiation. The primary aim of the report is to suggest that all these arguments continue to apply, and may in fact become more relevant, as the ECB moves out of its earlier deflationary environment.<\/p>\n\n\n\n

The author argues that:<\/strong><\/p>\n\n\n\n