Climate change to impact ECB’s ability to set interest rates

Climate change, freak weather events and energy transition will make it harder to measure the eurozone’s economic activity, according to research from the European Central Bank.

This will impact the bank’s ability to set monetary policy, Miles Parker, a senior ECB economist, wrote in a paper published Wednesday.

All three challenges are likely to affect potential output in the coming decades, a key input into quarterly projections that inform interest-rate decisions.

“Unmitigated climate change is ...