source and nature of the disturbances and their expected persistence. it also depends on whether energy price shocks fuel inflation via second - round effects on other prices and wages, for instance through inflation expectations. failing to respond to secondround effects, we may risk persistent overshoots of our inflation target and ultimately, a deanchoring of inflation expectations. on the other hand, wrongly interpreting temporary movements in energy prices as persistent, we could have larger output losses in the short term and may even increase inflation volatility. moreover, changes in relative prices, for instance due to higher carbon prices, are effective signals that push the transition in the right direction. an appropriately flexible and forward - looking monetary policy would help those necessary changes in relative prices to feed through. but flexibility must not come at the expense of a loss of credibility. in periods of structural change and large uncertainties, such as those created by climate change, well - anchored inflation expectations remain as important as ever. references aastveit, k. a., bjørnland, h. c., & cross, j. l. ( 2023 ), “ inflation expectations and the pass - through of oil prices ”, the review of economics and statistics, 105 ( 3 ), 733 – 743. aastveit, k. a., bjørnland, h. c., & thorsrud, l. a. ( 2015 ), “ what drives oil prices? emerging versus developed economies ”, journal of applied econometrics, 30 ( 7 ), 1013 – 1028. auclert, a., monnery, h., rognlie, m., & straub, l. ( 2023 ), ” managing an energy shock : fiscal and monetary policy ”, unpublished manuscript. baumeister, c., & hamilton, j. d. ( 2019 ), “ structural interpretation of vector autoregressions with incomplete identification : revisiting the role of oil supply and demand shocks », american economic review, 109 ( 5 ), 1873 - 1910. bjørnland, h. c., larsen, v. h., & maih, j. ( 2018 ), “ oil and macroeconomic ( in ) stability ”, american economic journal : macroeconomics, 10 ( 4 ), 128 – 151. bloom, n. ( 2009 ), “ the impact of uncertainty shocks ”

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