Is Climate Change Making Inflation Worse?

When people think of the costs of climate change, disasters like floods and wildfires often come to mind. Everyday expenses — milk, eggs, your electricity bill — can be affected too. The short answer: probably, but it’s complicated. Extreme weather is already pushing up the cost of some goods, and the effects vary by country.

The International Monetary Fund found that extreme temperatures have lowered inflation in developing countries but generally raise prices in wealthier ones. Droughts tend to increase inflation more and for longer in poorer countries, and storms can lift inflation briefly before it falls back.

Food, energy and insurance are three pocketbook items under pressure. Low rainfall last year cut wheat yields in Eastern Europe and China, desiccated coffee plants in Brazil and led some American ranchers to cull herds, reducing supplies and pushing prices higher.

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