(Bloomberg) -- The European Central Bank’s efforts to embrace the challenges of climate change are raising trust in the institution but don’t meaningfully change the way consumers think of future inflation, according to a Bundesbank study.
In a survey of German households conducted in June 2023, more than two-thirds reported that their confidence in the ECB had increased due to its engagement in topics related to global warming, Sandra Eickmeier and Luba Petersen wrote in a Bundesbank paper published Monday.
While nearly one in four believed the ECB’s climate focus helps it achieve price stability, about 17% and 20%, respectively, were concerned about potential compromises on that front and the institution’s independence.
Under President Christine Lagarde, the ECB has stepped up its efforts to incorporate climate change into all of its operations. Its latest strategy review, which ended in 2021, brought a climate action plan covering macroeconomic modeling, financial-stability monitoring, data collection, risk-assessment capabilities and monetary-policy operations.
More recently, ECB Executive Board member Frank Elderson has warned of inflation risks from damage to nature, arguing that degradation and climate change are both relevant to the central bank’s mandate to ensure price stability across the 20-nation euro zone.
Eickmeier and Petersen found “minimal impact” of the ECB’s climate engagement on households’ views on price trends ahead. While policymakers have an “accurate understanding of implications of the ECB’s climate measures on households’ trust, they overestimate the effects on inflation expectations,” they wrote.
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