With inflation reaching its highest levels since the euro was introduced, ECB officials have been wary of a wage-price spiral. Yet it’s profits, not wages, that are the real culprits in today’s inflation story.
As a consequence of the European Central Bank (ECB) raising its interest rates, banks are making sky-high unearned extra profits, while people and public budgets are only losing out. We believe that a money system that benefits private over public interests needs to be deeply reformed.
On the 16th of February, the European Parliament adopted a resolution offering a solution to the long-neglected secondary mandate of the European Central Bank (ECB) but fails to acknowledge the link between our dependence on fossil fuels and price stability.
Extreme weather events are growing in size, power and frequency, meaning our economies are increasingly disrupted. We show how this results in climateflation, which poses a dilemma to the ECB’s policymaking. In a world plagued by supply shocks induced by climate change, conventional monetary policy faces complicated trade-offs in terms of economic activity and prices, while at the same time proving incapable of tackling the source of inflation.
The ECB increases rates by another 0.5 percentage points despite its’ forecasts being wrong. This decision is unprecedented and will have serious socioeconomic consequences.
The ECB can reconcile its price stability mandate with the EU’s environmental and economic objectives by offering differentiated lower rates for particular types of investments such as energy efficiency and renewables.
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