Rising Heat Could Drive Up Food Prices Again

Yesterday, news broke that food prices are dropping for the first time in two years. However, the heatwave in Europe could push prices up again.

The ongoing heatwave in Europe may affect both inflation and GDP growth, says Frank Elderson, a member of the European Central Bank, to Bloomberg.

According to him, there is a significant link between the climate crisis and its effects on the economy. He argues that the connection between extreme weather and economic indicators, such as inflation, is too important to ignore.

Researchers: There is a Connection

This is also something researchers have noted.

The increasingly warmer climate can negatively impact agriculture, which in turn tends to contribute to rising food prices. This could indirectly affect future interest rate decisions from the ECB, Elderson reasons.

"Take the unusually hot summer of 2022, food price inflation rose by between 0.4 and 0.9 percentage points, and it had a quite measurable effect on German GDP growth," he says.