© Reuters. FILE PHOTO: Joachim Nagel, President of Germany’s federal reserve Bundesbank addresses the media during the bank’s annual news conference in Frankfurt, Germany March 1, 2023. REUTERS/Kai Pfaffenbach

(Reuters) – Eurozone policy-setters must be “stubborn” and continue increasing borrowing costs to battle inflation, Bundesbank chief Joachim Nagel told the Financial Times in comments published on Wednesday.

The remarks came after the European Central Bank raised interest rates by 50 basis points last week, keeping up its fight on inflation, amid calls by some investors to hold back on policy tightening until turmoil in the banking sector eased.

“Our fight against inflation is not over,” Nagel told the newspaper, adding that he certainly felt “price pressures are strong and broad-based across the economy.”

“There’s still some way to go, but we are approaching restrictive territory,” he said, adding that once the ECB stopped raising rates it would have to resist calls to cut them.

Nagel said it was possible for European banks to become more cautious in lending following the turmoil.

But he dismissed concerns it could affect them, saying it was “too early” to conclude the region was heading for a credit crunch.

The turmoil was triggered by the collapse of US midsized lenders Silicon Valley Bank and Signature Bank (NASDAQ: ), quickly ensnaring Credit Suisse as investors fretted about other ticking bombs in the banking system.

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