In the view of Bundesbank President Joachim Nagel, the European Central Bank (ECB) should not move away from higher interest rates too early in the fight against inflation. It is necessary to raise the key rates to sufficiently curbing levels, so that the inflation rate returns in time to the target of two percent, said Nagel on Friday in a speech in Edinburgh, according to the manuscript. "We should also keep policy rates sufficiently high for as long as necessary to ensure lasting price stability," he said. Currently, inflation in the euro area is still far from the ECB's target of two percent. In February, it was more than four times as high at 8.5 percent.

"If inflation develops as forecast, this should not, in my view, mean the end of the increase sequence," Nagel noted. According to their latest forecasts for the current year, the ECB's economists still expect consumer prices in the euro area to rise by 5.3 percent. The ECB has already raised key rates six times in a row since July 2022 – most recently by 0.50 percentage points in mid-March. This means that the deposit rate that banks receive from the central bank for parking excess funds is now 3.00 percent.

Nagel also spoke out in favour of making the ECB's securities reduction even more extensive after June. "For the third quarter, I would welcome an acceleration of the process," he said. The normalisation of the balance sheet is an important component of the change in monetary policy. Currently, bond holdings are being reduced by 15 billion euros per month.