Volker Wieland believes further ECB interest rate hikes are necessary (Börsen-Zeitung, Bild)

To get inflation in the euro area under control, the European Central Bank (ECB) should continue to raise interest rates, according to Prof. Volker Wieland. "At the moment, the greater danger is certainly to do too little," he said in an interview with Börsen-Zeitung.

A look at core inflation - excluding food and energy prices - which most recently stood at 5.5 percent, showed that inflation had broadened. With wages rising at the same time, second- and third-round effects are likely, he said. "In any case, the interest rate hikes so far will be far from sufficient," Wieland said.

"I assume that an interest rate of 4 to 5 percent will be necessary on the money market to get inflation under control in the long term," Wieland explained in an interview with the tabloid "Bild".

In addition, the large balance sheet tends to have an inflationary effect, he added. According to Wieland, the ECB should therefore significantly increase the pace of balance sheet reduction. "This is the only way it can also create room for maneuver for future crises," Wieland said.

Ending reinvestment under the APP bond-buying program is a right step, he said. "However, it is not yet particularly ambitious," Wieland said. The ECB should soon start to run down the bond holdings acquired under the Corona emergency purchase program PEPP. "After all, given the high inflation, there is no good reason to continue holding so many bonds." In particular, the ECB could sell corporate bonds and other private securities now, according to Wieland's assessment.

Börsen-Zeitung: "Derzeit ist ganz sicher die größere Gefahr, zu wenig zu tun"

Bild: "Ist der Zins-Schock bald vorbei?"