In recent years, extreme weather events have become increasingly frequent and intense, with tangible effects on everyday life. Heatwaves, heavy rainfall, prolonged droughts, and unexpected cold spells directly affect agricultural output, infrastructure, energy supply, and global supply chains.
These shocks ripple through the real economy, disrupting production and driving cost volatility. As a result, growing attention is being paid to the relationship between climate change and price stability. Against this backdrop, a new study by Banca d’Italia examines how extreme weather events influence inflation dynamics in our country.
Climate extremes and inflation: evidence from Italian regional data
Published in the Questioni di Economia e Finanza series, the new Banca d’Italia study explores the link between extreme climate events and inflation trends across Italy. Authored by Alessandro Mistretta, the research draws on regional data (NUTS2 level) from 2000 to 2025 to assess how acute weather phenomena — including heatwaves, cold spells, heavy rainfall, drought, strong winds, and hail — affect consumer prices.
The findings show that unusually high temperatures tend to dampen inflation, while particularly cold conditions push it up, mainly through the energy component. Intense rainfall is also associated with lower energy prices, whereas drought does not display consistent effects. Overall, the impact on prices appears temporary, with effects generally fading within about two years.
The study highlights the connection between extreme weather events and price fluctuations, with meaningful implications for monetary and economic policy, as well as for central banks and policymakers. Monitoring the evolution of extreme events across regions and leveraging tools such as the E3CI Index can help industry professionals make better-informed decisions and design more forward-looking strategies.
Download the Banca d’Italia report
To explore the study’s findings in greater detail and gain deeper insight into the relationships identified over the years analyzed, download the full report.