What is Climateflation?

By: Anneken Tappe · March 26, 2024 · Reading Time: 2 minutes

Climate Change and Higher Costs

Americans have just lived through a period of the highest rate of inflation in decades. Price dynamics have various drivers, but there’s one that shows little sign of slowing down: climate change.

Climate change may be fueling inflation, according to a new study published by science journal Nature , a phenomenon referred to as climateflation.

Rising temperatures and increasing counts of extreme weather events, including very high or low temperatures, as well as draughts and floods, are putting global supply chains at risk, upping the risk for shortages, and rising prices.

What Does This Mean?

Data based on weather conditions and prices in 121 countries from 1996 to 2021 — shows that temperature increases can cause persistent increases in food inflation. This may be due to crop shortages and diminished productivity caused by higher temperatures, effects that are especially pronounced in lower latitude regions. This latest study predicts food inflation could surge as much as 3 percentage points annually.

This could have major policy implications. For reference, the Federal Reserve, which has been fighting America’s recent bout of inflation with high interest rates that are yet to come down, has a mandate to keep prices stable, and a target inflation rate of 2%.

Looking for more stories like this? Check out On the Money — SoFi’s one-stop-shop for news, trends, and tips!

Check it out

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

TLS 1.2 Encrypted
Equal Housing Lender