ECB must act decisively to tackle high inflation

According to the Deutsche Bundesbank's President Joachim Nagel, the European Central Bank (ECB) must take tough measures in order to combat inflation, which is at a record high level.

The head of the Bundesbank said that he expects further interest-rate hikes, adding that decisive action is needed. 

Nagel, as one of the most ardent supporters of the hawkish stance on the ECB's Governing Council, returned to his calls for a reduction in the ECB's balance sheet, which contains about €5 trillion ($5.1 trillion) of bonds acquired in times of economic crises.

In addition, he added that the topic of a slowdown in the growth of bond yields in the euro area, associated with the policy of reinvestment, has been raised more and more recently. According to the politician, movements of short-term and long-term rates in different directions are illogical and inconsistent, since if there are two instruments that can normalize the economy, one should not abandon any of them.

Isabel Schnabel, an executive board member of the ECB, said the European Central Bank is likely to be forced to raise interest rates to levels that could slow the economy in order to be able to control prices. Bostjan Vasle and Peter Kazimir, the heads of the central banks of Slovenia and Slovakia, respectively, joined this opinion. 

In addition, Joachim Nagel said that the inflation rate in Germany will overcome the 8.5% mark this year, and it will be above 7% next year. Also, the politician predicted a recession in the economy in the current quarter, which will continue in the first quarter of 2023.