El Nino heatwaves to ‘fuel inflation next year’
The ‘Super El Nino’ triggering record temperatures across Europe could add a full percentage point to inflation next year, hampering central bank efforts to slow down price rises, a top investment bank has warned. According to an analysis by Jefferies, harsh weather unleashed by the meteorological phenomenon will pose “an inflationary threat” next year and [...]
A powerful El Nino weather event, dubbed "Super El Nino," is expected to contribute to record temperatures in Europe and potentially increase inflation by up to one percentage point in the coming year, according to a warning from top investment bank Jefferies. The meteorological phenomenon, which causes unusually warm sea temperatures in the Pacific Ocean, is responsible for the severe heatwaves and drought conditions currently affecting Europe.
This trend is projected to raise food prices by five to nine percent across the UK and Europe, according to Jefferies chief European economist Mohit Kumar. The severe weather impact, already exacerbated by the ongoing US-Iran war, is likely to further elevate inflation, potentially by an additional 0.5 to 1 percent next year. Food and related products account for 13 percent of the European consumer basket, and the severe weather impact could significantly contribute to inflation.
The Bank of England's rate-setting Monetary Policy Committee has taken note of the El Nino event as a potential supply risk and added it to their monitoring list ahead of future interest rate decisions. Deputy governor Dave Ramsden and external member Megan Greene have both raised concerns about the weather event's potential to add to inflationary pressures.
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