European Central Bank (ECB) Executive Board Member Isabel Schnabel said on Thursday that Europe is entering a "new age of energy price inflation" as the European Union introduces sanctions on Russian energy imports and measures to accelerate the transition to green energy. She promised monetary policy will "protect the purchasing power of people by ensuring that the current protracted period of high inflation will not become entrenched in expectations, while remaining supportive of growth and employment."
Schnabel listed three different energy-related "shocks" that could "lead to a prolonged period of upside pressure on inflation." The so-called climateflation will be the impact of natural disasters and severe weather events caused by climate change. "Fossilflation" is the cost of the dependency on fossil energy sources and is "to blame for much of the recent strong increase in euro area inflation," according to Schnabel. Finally, the "greenflation" is caused by the low supply of metals and minerals needed for most green technologies. "As more and more industries switch to low-emission technologies, greenflation can be expected to exert upward pressure on prices of a broad range of products during the transition period," she predicted.