The ECB’s Interest-Rate Balancing Act
As monetary policymakers seek to tackle record-high eurozone inflation, they should not forget that financial stability and a faster green transition are crucial to price stability. Cutting green investments in order to push down prices in the short run will make the economy more vulnerable to climate-related shocks.
BRUSSELS – Since 2008, the European Central Bank has learned important and costly lessons concerning the economic preconditions of price stability. Two of the most important requirements are financial stability and a faster green transition. Policymakers should not forget these lessons as they seek to tackle record-high eurozone inflation.