These are the Key Macro Events for the upcoming week.

The ECB kept its policy rates on hold in September, for the second consecutive meeting.

The short-term impact of climate change on inflation often is analysed by looking at transition risks, such as the impact of carbon pricing and its consequences for energy price inflation. For instance, in its December 2024 Eurosystem staff macroeconomic projections for the eurozone[1], the ECB estimates that national green discretionary fiscal measures (e.g. carbon pricing and energy taxes) added 0.2 percentage points to eurozone inflation in 2024 and will add a similar amount in 2025. Moreover, ECB staff project that the expansion of emissions trading to heating of buildings and transportation could add up to 0.4pp[2] to inflation in 2027. In contrast to transition policies, the impact of acute and chronic physical climate risks on inflation is considered to be significant only in the medium to longer term. Still, climate and weather-related hazards, such as temperature extremes, storms, floods, drought and wildfires is rising and its economic damage are increasing. Consequently, global food prices have occasionally been lifted by extreme climate and weather-related events. As climate change is expected to increase the intensity and frequency of various extreme weather events in the coming years, the impact on inflation should also become more significant. In this note we analyse the short-term impact of acute physical climate risk on food prices and headline inflation in the eurozone.