Report
Will central banks have to react to the inflation that will result from the energy transition?
The energy transition will certainly bring about a lasting rise in energy prices and therefore in inflation due to the intermittency of renewable energy production and the need to finance massive investments. Will central banks have to react to this additional inflation caused by the energy transition (as ECB’s Isabel Schnabel suggested in January 2022) ? The answer seems to be clearly no: The cost of energy production is higher because of the energy transition, not because of excessive demand for energy relative to energy supply: reducing energy demand through a restrictive monetary policy would have no effect on the additional inflation; The energy transition will require massive additional investment; raising interest rates would then be totally counterproductive by making it difficult to carry out these investments.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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