Beautiful Virgin Islands

Thursday, Oct 09, 2025

Europe's central bank will allow higher inflation to hit climate goals

Europe's central bank will allow higher inflation to hit climate goals

The bank said it would do more to take the impact of climate change into its monetary policy, saying that global warming could have “profound implications” for price stability.
The European Central Bank has adopted a new approach to managing the economy that would tolerate transitory periods of consumer inflation moderately above its 2% goal, and take greater account of climate change in its forecasting and stimulus programmes.

The central bank for the 19 countries that use the euro said it was replacing its previous inflation goal of “below but close to” 2% annual inflation. The new target is described as a “symmetric” 2%.

That means it would allow a "transitory period” of above-target inflation. In theory, that would give the bank space to maintain low-interest rates and stimulus programmes such as bond purchases with newly created money for a longer period of time.

ECB President Christine Lagarde said that the new goal would give the bank more room to take “especially forceful and persistent action” in the event of an unexpected economic crisis.

Such room to maneuver is especially important when market rates are close to zero, as they are now in many instances. That means the economy could more easily slip into deflation, a crippling downward spiral of prices and falling investment, without decisive central bank intervention.

The decision moves the ECB in the same direction as the U.S. Federal Reserve, which shifted to average inflation targeting last year that could allow inflation moderately above 2% for some time.

The ECB goal is not as aggressive as the Fed's, since it would “not actively aim to run inflation above target to make up for previous shortfall,” said Andrew Kenningham, chief Europe economist at Capital Economics.

“It would have no immediate implications for monetary policy, but in the long run may imply policy would be looser for longer,” Kenningham said in an emailed research note.

In another change, Lagarde said public dialogue with citizens had convinced the bank to start counting the rise in house prices in its inflation measures to better represent consumer prices as they are relevant to households. Including owner-occupied housing in the EU's inflation index would take years, however; therefore the bank said it plans to use initial estimates of housing costs to supplement its inflation measures.

The bank said it would do more to take the impact of climate change into its monetary policy, saying that global warming could have “profound implications” for price stability. It said it would expand its economic models and statistics to better assess the effect that climate change could have on the economy.

When purchasing bonds, the bank said it could take into consideration whether the companies issuing those bonds were compliant with EU legislation implementing the 2015 Paris climate change accords. Buying corporate and government bonds is a tool the bank uses to drive down borrowing costs for businesses, households and government budgets.

Buying such “green bonds” in effect makes it cheaper to finance projects deemed to lower carbon dioxide emissions, the main greenhouse gas blamed by scientists for global warming climate change.

The bank's mandate established in the basic European Union treaty is to pursue price stability. Once that is achieved, it can pursue other goals consistent with the EU's economic policies.

The new strategy will be applied at the next ECB policy meeting on July 22.
Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
France: Less Than a Month After His Appointment, the New French Prime Minister Resigns
Hungarian Prime Minister Viktor Orbán stated that Hungary will not adopt the euro because the European Union is falling apart.
Sarah Mullally Becomes First Woman Appointed Archbishop of Canterbury
Mayor in western Germany in intensive care after stabbing
Australian government pays Deloitte nearly half a million dollars for a report built on fabricated quotes, fake citations, and AI-generated nonsense.
US Prosecutors Gained Legal Approval to Hack Telegram Servers
Macron Faces Intensifying Pressure to Resign or Trigger New Elections Amid France’s Political Turmoil
Standard Chartered Names Roberto Hoornweg as Sole Head of Corporate & Investment Banking
UK Asylum Housing Firm Faces Backlash Over £187 Million Profits and Poor Living Conditions
UK Police Crack Major Gang in Smuggling of up to 40,000 Stolen Phones to China
BYD’s UK Sales Soar Nearly Nine-Fold, Making Britain Its Biggest Market Outside China
Trump Proposes Farm Bailout from Tariff Revenues Amid Backlash from Other Industries
FIFA Accuses Malaysia of Forging Citizenship Documents, Suspends Seven Footballers
Latvia to Bar Tourist and Occasional Buses to Russia and Belarus Until 2026
A Dollar Coin Featuring Trump’s Portrait Expected to Be Issued Next Year
Australia Orders X to Block Murder Videos, Citing Online Safety and Public Exposure
Three Scientists Awarded Nobel Prize in Medicine for Discovery of Immune Self-Tolerance Mechanism
OpenAI and AMD Forge Landmark AI-Chip Alliance with Equity Option
Munich Airport Reopens After Second Drone Shutdown
France Names New Government Amid Political Crisis
Trump Stands Firm in Shutdown Showdown and Declares War on Drug Cartels — Turning Crisis into Opportunity
Surge of U.S. Billionaires Transforms London’s Peninsula Apartments into Ultra-Luxury Stronghold
Pro Europe and Anti-War Babiš Poised to Return to Power After Czech Parliamentary Vote
Jeff Bezos Calls AI Surge a ‘Good’ Bubble, Urges Focus on Lasting Innovation
Japan’s Ruling Party Chooses Sanae Takaichi, Clearing Path to First Female Prime Minister
Sean ‘Diddy’ Combs Sentenced to Fifty Months in Prison Following Prostitution Conviction
Taylor Swift’s ‘Showgirl’ Launch Extends Billion-Dollar Empire
Trump Administration Launches “TrumpRx” Plan to Enable Direct Drug Sales at Deep Discounts
Trump Announces Intention to Impose 100 Percent Tariff on Foreign-Made Films
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Singapore and Hong Kong Vie to Dominate Asia’s Rising Gold Trade
Trump Organization Teams with Saudi Developer on $1 Billion Trump Plaza in Jeddah
Manhattan Sees Surge in Office-to-Housing Conversions, Highest Since 2008
Switzerland and U.S. Issue Joint Assurance Against Currency Manipulation
Electronic Arts to Be Taken Private in Historic $55 Billion Buyout
Thomas Jacob Sanford Named as Suspect in Deadly Michigan Church Shooting and Arson
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
New York Man Arrested After On-Air Confession to 2017 Parents’ Murders
U.S. Defense Chief Orders Sudden Summit of Hundreds of Generals and Admirals
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
Trump Claims FBI Planted 274 Agents at Capitol Riot, Citing Unverified Reports
India: Internet Suspended in Bareilly Amid Communal Clashes Between Muslims and Hindus
Supreme Court Extends Freeze on Nearly $5 Billion in U.S. Foreign Aid at Trump’s Request
Archaeologists Recover Statues and Temples from 2,000-Year-Old Sunken City off Alexandria
China Deploys 2,000 Workers to Spain to Build Major EV Battery Factory, Raising European Dependence
Speed Takes Over: How Drive-Through Coffee Chains Are Rewriting U.S. Coffee Culture
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Ringo Starr Champions Enduring Beatles Legacy While Debuting Las Vegas Art Show
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Colombian President Petro Vows to Mobilize Volunteers for Gaza and Joins List of Fighters
×