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ECB’s Schnabel Sees Climate Change, War Leading to Higher Rates

  • Policy makers can no longer look through energy-price shocks
  • Compensation measures crucial to prevent rise in inequality
Isabel Schnabel
Isabel SchnabelPhotographer: Alex Kraus/Bloomberg

The war in Ukraine and the fight against climate change are creating a new “macroeconomic environment” where higher interest rates may be needed to ensure consumers don’t lose faith in central banks’ ability to keep inflation under control, according to European Central Bank Executive Board member Isabel Schnabel.

Policy makers no longer have the luxury to ignore surges in energy prices they have previously argued are temporary and outside their control, Schnabel said in Bloomberg’s Stephanomics podcast. She urged governments to consider compensatory measures to ensure policies to stop global warming don’t unduly raise inequality.