ECB's Nagel: It is necessary to raise policy rates to sufficiently restrictive levels.

The European Central Bank must continue to raise interest rates and should speed up the reduction of its balance sheet as rapid wage growth is putting upward pressure on an already high inflation rate, Bundesbank President Joachim Nagel said on Friday.

ECB's Nagel is on the wires:

It is necessary to raise policy rates to sufficiently restrictive levels, the wind down should accelerate from Q3.

The recent wage deals are inconsistent with price stability and are to prolong the prevailing period of high inflation.

There are signs of second-round effects from inflation -induced higher wage increases back to prices.

The labour market is to remain tight, labour shortages are obstacles to production.