Global temperatures and inflation: More volatile, less homogeneous inflation pressures across countries

Climate change can cause large economic disruptions by introducing new risks to supply chains and changing demand patterns. This economic memo explores how climate change, via its impact on global temperatures, transmits to inflation in Europe, with a countryspecific focus on Denmark, Norway and Spain. The results indicate that global temperature shocks primarily affect inflation through energy, food and service price channels. The impacts vary across countries, indicating that warmer countries tend to face higher inflationary pressures, while colder countries experience deflationary pressures. Awareness of these heterogeneous effects is important for central banks in safeguarding price stability