Justin Ho

There were a lot of other sources of inflation.

People may remember Russia invasion of Ukraine, lots of other sources of inflation.

But this was kind of a pretty substantive effect to see from just a single summer heat wave.

Yeah, it's a really important field of study and it's emerging because central banks are concerned about what the implications of climate change have for sort of their core mandate of price stability, right?

They want to keep prices stable and it is a challenging thing to do because there are so many different sort of inputs into prices.

And there's a lot of differences, especially when you look at a global level, when you're trying to

really get your arms around this problem, how do you kind of tease out some of the differences between countries, right?

Each country has its own kind of CPI basket.

And in some countries, food is a much bigger portion of that basket.

For instance, you have things like recessions.

There's a lot of things that can influence these numbers.

Yeah, I'm really glad you raised this because, you know, as one, you know, economist at a central bank I spoke to pointed out, you know, it almost may not matter if you have extreme weather events, you know, prices rise, but then they, you know, the inflation cools down, things kind of settle down.

It may not almost matter if people think climate change is going to cause problems.

price inflation, and then they start acting like that and they start asking for raises at work and things like that.

And then you get kind of the effect of climate inflation, even if initially the initial event was not super substantive.

We're talking about central banks being worried about this.

What are the tools they have at their disposal?

Interest rates, right?

And when you start raising interest rates as a tool, then do you start harming the economic activity as well?

If the economy is suffering already, you don't want to add on top of that and make things worse.