(Bloomberg) -- The European Central Bank needs to continue increasing interest rates even if that weighs on economic output, according to Bundesbank President Joachim Nagel.

“We must ensure that high inflation ends soon,” Nagel said in speech in Frankfurt on Tuesday. “I will therefore continue to do my utmost to ensure that we, the Governing Council of the ECB, don’t let up too early and that we continue to push ahead with monetary policy normalization -- even if our measures damp economic development.” 

He added that “in a situation where monetary policy gets behind the curve, the overall economic costs would be significantly higher.”

Nagel, who is among the most hawkish ECB rate setters, said policy normalization doesn’t just include borrowing costs, but also reducing the central bank’s balance sheet. The ECB is planning to agree key principles of so-called quantitative tightening at its December meeting. 

Nagel also said:

  • German inflation likely to average at least 7% in 2023
  • Germany’s economy may “severely contract” over the winter

©2022 Bloomberg L.P.