Policies to tackle climate change are likely to keep energy prices higher for longer and may force the European Central Bank to withdraw its stimulus more quickly than planned, one of its senior executives has warned.
Isabel Schnabel, the ECB executive responsible for market operations, said the planned transition away from fossil fuels to a greener low-carbon economy “poses measurable upside risks to our baseline projection of inflation over the medium term”.
After the economy rebounded from the impact of the coronavirus pandemic, a sharp surge in energy prices drove inflation to 5 per cent in December, a record high for the eurozone. But the ECB has forecast energy prices will fade and has committed to maintain its ultra-loose monetary policy for at least another year.
