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Climate change likely to boost inflation, Bank of England’s Mann says
Published by Jessica Weisman-Pitts
Posted on November 13, 2023
2 min readLast updated: January 31, 2026
Global Banking & Finance Review®
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Published by Jessica Weisman-Pitts
Posted on November 13, 2023
2 min readLast updated: January 31, 2026
By David Milliken
LONDON (Reuters) – Climate change and countries’ different approaches to combat it are likely boost inflation and have other economic impacts that are directly relevant to central bank rate-setters, Bank of England policymaker Catherine Mann said on Monday.
“The research here points to increased inflation, increased inflation persistence, and increased inflation volatility associated with climate shocks, policies, and spillovers,” she said in the text of a speech published by the Bank of England.
Mann was part of a minority of three Monetary Policy Committee members who voted this month for the BoE to raise its main interest rate to 5.5% from 5.25%.
Much of the BoE’s work on climate change so far has focused on its potential longer-term impact on insurers and banks, through risks posed from extreme weather and on broader regulatory change that may affect their investments.
However, Mann said climate change policies were increasingly likely to have an impact on inflation over the shorter two- to three-year horizon which the MPC focuses on.
“Not only is it within my remit to respond to the macroeconomic effects of climate change, but my remit requires me to do so,” she said in prepared remarks for a University of Oxford seminar.
Research pointed towards price shocks created by changes in carbon pricing as having a more persistent effect on inflation than oil price shocks, she said.
Varying degrees of action to combat climate change in different countries were likely to create global economic spillovers, and the choice between carbon taxes and emission trading schemes was also significant, she added.
“Research on the impacts and interactions between carbon policies domestically and abroad is particularly relevant for the UK, where a government commitment to net zero in 2050 has already been made,” she said.
(Reporting by David Milliken; Editing by William Schomberg)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI) or the Producer Price Index (PPI).
Monetary policy refers to the actions taken by a country's central bank to control the money supply and interest rates to achieve macroeconomic goals such as controlling inflation, consumption, growth, and liquidity.
Climate change refers to significant changes in global temperatures and weather patterns over time. While climate change is a natural phenomenon, human activities have accelerated its effects, leading to severe environmental impacts.
Carbon pricing is a method for reducing global warming emissions. It charges those who emit carbon dioxide (CO2) for their emissions, encouraging them to reduce their carbon footprint through economic incentives.
Inflation volatility refers to the degree of variation in inflation rates over time. High volatility can create uncertainty in the economy, affecting consumer behavior and business investment decisions.
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