In the view of Bundesbank President Joachim Nagel, the European Central Bank (ECB) may soon initiate a turnaround in interest rates in view of skyrocketing inflation figures.

The bond purchase programs would be reduced to 20 billion euros per month by June, Nagel told the ARD business magazine “plusminus” in an interview published on Wednesday.

"That's quite a number compared to the previous numbers," he said.

In June, the ECB will then make a new decision based on new data.

"What we are now seeing at the current edge indicates that savers may soon be able to look forward to higher interest rates again," said Nagel.

The ECB last raised interest rates in 2011.

The key interest rate for supplying financial institutions with money is currently at a record low of 0.0 percent.

The deposit rate is even minus 0.5 percent.

A deposit rate below zero percent means that banks have to pay penalty interest if they park excess funds with the central bank.

“High inflation must not become entrenched”

The Bundesbank President is worried about the high inflation rate of 7.3 percent in Germany.

He explained that people with low or middle incomes in particular would be hit particularly hard by the high prices.

"And that's where we have to go.

We as central bankers.

These high inflation rates must not be allowed to persist,” said Nagel.

That will certainly be a task, especially for the euro central bank this year.

According to Nagel, there are many well-known special factors in inflation.

"Of course now again through this terrible war," he added.

An improvement can then be expected if certain price increases move out of these calculations again.

"But overall it's obviously a development that we can't like," he explained.

“And we already expect an annual average inflation rate of 6 percent in 2022.

And of course that is too much.”

America's central bank is aggressive

The American central bank, the Federal Reserve (Fed), is much further along: In view of the high inflation, it intends to tighten the interest rate screw and probably shrink its balance sheet as early as May.

This is according to the minutes of the March 16 monetary policy meeting, released on Wednesday.

Accordingly, many of the monetary watchdogs believe it is appropriate that a large interest rate hike of half a percentage point or even several such increases in the future may be appropriate.

This applies if inflation risks remain elevated or even intensify.

At the March meeting, many members of the Open Market Committee responsible for interest rate policy were already in favor of taking such a large interest rate hike.

However, the committee decided to raise interest rates by a quarter of a point to the new interest rate level of 0.25 to 0.50 percent - probably also against the background of the uncertainty caused by the Ukraine war.

Fed Director Lael Brainard recently signaled an aggressive approach and emphasized that the central bank was also prepared to act more strongly if inflation developments required it.

Supply bottlenecks in the wake of the Corona crisis have led to consumer prices rising by 7.9 percent, the fastest rate in 40 years.

In view of the high inflationary pressure, the financial markets are expecting unusually large interest rate hikes of half a percentage point each in May and June: after further tightening, the key interest rate could be in a range of 2.5 to 2.75 percent at the end of the year.

As an accompanying measure, the Fed wants to reduce its balance sheet, which had blown up to almost 9 trillion dollars through massive bond purchases during the crisis, thereby withdrawing liquidity from the financial markets.

Fed chief Jerome Powell and Brainard had signaled that the meltdown could begin as early as May.

At the March meeting, a concrete timetable was already being played out: According to this, the government bond holdings could initially be reduced by $60 billion a month and at the same time the stock of mortgage securities (MBS) could be reduced by $35 billion.