Global warming may affect interest ratesMarch 2021
Global warming will probably affect interest rates as well as the prices we pay for goods and services, according to the world’s oldest central bank, the Swedish Riksbank.
Climate change increases risks and businesses may need help to deal with them. One way for central banks to help businesses is to cut interest rates. Lower rates mean cheaper loans for businesses and for their customers.
Cheaper loans mean businesses have more money to invest and consumers have more cash over to spend on goods and services. That, in turn, affects all prices.
Interest rates are already super low as central banks have slashed them in order to help businesses survive the financial crisis about a decade ago and the ongoing corona pandemic.
This will make it difficult for central banks to contribute to stability and help businesses.
“If climate change increases the risk of catastrophe, makes economic developments more uncertain and worsens growth prospects, it may lead to a lower long-term real interest rate,” the Riksbank said, according to Bloomberg