Strong inflation will remain at a very high level, the president of the German central bank says

Joachim Nagel, the president of Germany’s central bank, the Bundesbank, and one of the more cautious members of the ECB, told CNBC’s Annette Weisbach on Wednesday that consumer price inflation is expected to remain strongly elevated.

“It looks like, for at least the next month or two, inflation will remain at very high levels, with the expectation that perhaps for the second half inflation may come down to some extent,” he said on Wednesday.

“But still, what we expect for this year for Germany is an average inflation rate of around 6 to 7%.”

Markets have been speculating on higher interest rates for longer in the euro zone, after data released this week showed higher than expected inflation numbers from France and Spain.

European government bond yields rose on Tuesday and then again on Wednesday on the back of the latest data. The yield on the 10-year German bund – seen as the sector’s main benchmark – climbed to its highest level since 2011 on Wednesday.

Goldman Sachs said on Wednesday that it was increasing its expectations for a rise in interest rates in the euro area. The investment bank is now planning another 50 basis point hike in May, rather than just 25 basis points at the time. One basis point is equal to 0.01%.

Speaking to CNBC, Nagel also said that “the journey is not over” and that the European Central Bank “needs to do more” to reduce its balance sheet.

The ECB this month is starting to sell bonds at a pace of 15 billion euros ($16 billion) per month until June. Reducing the balance sheet is also a measure to bring down inflation in the bloc.

Eurostat, the region’s statistics office, is expected to publish new inflation figures on Thursday.