“Currently, inflation is a very interesting story. And I dare you to ask: How could a central bank fight with its instruments, traditional or not, against the five types of inflation, excluding monetary inflation?” BRD Chief Economist Florian Libocore asked at the annual AAFBR conference on Thursday. took place in the central office of the National Bank

Climate inflation is a phenomenon in which climate change leads to inflation

“We are talking about monetary policy as a policy responsible for price stability. But I have read different opinions about the phases of inflation. One of them is climatic inflation, which is caused by natural disasters,” Libokor explained.

Climate inflation refers to the phenomenon in which climate change leads to inflation through multiple channels. Most important are the impacts of extreme weather on agriculture, infrastructure and the ability of workers to keep their jobs, which can lead to supply chain disruptions and labor shortages.

Research into the impact of extreme weather on inflation suggests that global warming could increase global inflation by up to 1% each year by 2035.

Climate change may play an even bigger role in future price increases. In the US, Congress has taken action against climate change and runaway inflation, most recently with legislation that includes provisions to mitigate climate change through a range of measures, such as tax incentives for energy production and technology investments, including wind, solar and geothermal energy .

Fossil inflation is associated with oil and conventional energy sources

Another type of inflation is fossil fuel inflation, Libokor continued. “It is connected, say, with oil and conventional sources of energy,” – added the chief economist of BRD.

Fossil inflation is a term used to describe inflationary pressures caused by the high cost of fossil fuels. According to Mark Zandi, chief economist at Moody’s, fossil fuels have been the main cause of every period of inflation since World War II.

And the European Commission’s plan to cut Russian gas imports by two-thirds by the end of the year fuels such inflation.

Green inflation. Neither green nor digital means only positive aspects.

Another “head” of inflation is “green inflation,” Libocor explains. According to him, the transition to a green economy is associated with certain costs.

Many green industries not only in Romania, but also in other European countries turned out to be unprofitable. And this is because around them, more precisely upstream, all kinds of related industries have developed from these green industries, which are very expensive to produce, – explained the chief economist of the BNR Valentyn Lazeya at the previous conference, giving the example of the blades of wind turbine power plants. .

“Wind generator blades are made of expensive materials – titanium alloys – instead of aluminum or cheaper materials. Or, for example, this vertical farming, also related to the green economy, uses robots that sprinkle dill and parsley. These expensive solutions, if there is no cost control, turn against the green industry, because no one will buy a kilowatt-hour if it costs twice as much because titanium was used, or no one will buy their asparagus if it costs 5 lei link and amd,” Valentyn Lazeya also said.

Neither green nor digital means only positive aspects. Speeding up any process will never bring the expected result at the desired time. Before achieving the desired results, this will bring problems that we did not initially consider and that we will have to solve. Haste, as they say, spoils the work. And I think doing it in small steps is much better,” Libocor also said at the ZF conference.

Neither green nor digital means only positive aspects. For example, when the banking sector, say, aims to finance such projects, it faces the problem of risk management in this sector, explained BRD’s chief economist. It may not be known, but the hubs or the famous data storage “containers” for the whole digital domain are stored somewhere at the poles because they create a very high carbon footprint, a very high temperature, and then they need to be stored somewhere cold, he added.

Another major factor in inflation is contractionary inflation. You already know that

This type of “disguised inflation” was manifested here and is manifested, an official of the National Institute of Statistics confirmed to HotNews. “I felt it on my skin – the 32 cm pizza “entered the water” and was 28 centimeters, but the price remained the same as the 32.”

The phenomenon of shrinkflation (hidden inflation) is observed not only in Romania, but also everywhere. An investigation by the German newspaper Handelsblatt showed how German confectioners abandoned the use of butter in cakes, preferring much cheaper margarine (in Germany, butter has risen in price by almost 50%). French confectioners have also reduced the amount of jam in their croissants and use less honey to cover them, writes Les Echos.

A fifth of the inflation that Iserescu and his people must reduce is “greed inflation”.

Heads of central banks also note that we are observing “obvious difficulties” in reducing the budget deficit in accordance with the intended goal. “A tentative set of adjustment measures has taken shape ahead of the inflation report, but it remains difficult to assess how sufficient they will be to ensure compliance with this year’s adjustment milestone,” the report’s authors said.

They indirectly confirm the existence of the phenomenon of “greedy inflation” in the economy, noting in the report: “The maintenance of an acute inflationary environment could motivate a further increase in the profit margin of companies.” In addition, and in parallel, new inflationary trends may intensify, which will negatively affect the purchasing power of the population. Against the background of the erosion of the latter, claims regarding a more active salary increase, differentiated according to the most affected branches of activity, are not excluded, the authors of the Report conclude.

“I dare to ask you, without waiting for an answer, how could the central bank fight with its instruments, traditional or not, against all these, let’s say, five types of inflation, excluding monetary inflation?” Florian Libokor asked rhetorically.

How a central bank, not our central bank, a central bank it doesn’t matter which one, can fight against fossil fuel inflation, or, say, green inflation or climate inflation. It will be very interesting to get an answer to this question, concludes the chief economist of BRD.