FRANKFURT, (Reuters) – The European Central Bank’s German policymakers discussed the possibility of an interest rate rise on Wednesday. Joachim Nagel, new chief Bundesbank, suggested that a hike could be made this year as inflation continues to remain high.

Last week, the ECB reneged on its pledge to not raise rates until 2022. Policymakers now consider how to get rid of unconventional policies that kept the euro area afloat over the last decade.

Nagel took over the German central banking in January and maintained the historically conservative position of the Bundesbank. He warned that it could prove costly to act too late when normalizing policy.

Nagel said that normalizing monetary policies would be a priority if (inflationary) conditions remain unchanged by March. The first thing to do is stop buying net assets in 2022. This would allow interest rates to be increased before the year ends.

Klaas Knot, chief of the Dutch central bank, joined Nagel to discuss a rate increase this year. This would mark the first rise in borrowing costs by the ECB since 2011.

Isabel Schnabel was also a member of the ECB Board and a German national. However, she also suggested that a rate rise may be required to compensate for the inflation shock.

“Raising rates would not lower energy prices,” Schnabel said in a Twitter (NYSE:) Q&A. We may need to react if inflation is high as it could lead to de-anchoring inflation expectations. Our mandate is price stability.

Schnabel stated that inflation reached a new record of 5.1% and warned that it could reach higher levels over the next few months.

Although markets are pricing rate hikes of 48 basis points by December to bring down the deposit interest rate, policymakers and economists have questioned market pricing and advocate for slower moves.

Schnabel stated that normalization will occur data dependent and gradually to avoid disruptions.

Nagel has worked a large part of his professional life in central bank banking. He believes that prompt action could prevent the ECB from making more extreme moves that may lead to volatility.

Nagel stated that “the economic cost of not acting sooner than necessary is significantly greater”

We would need to increase interest rates faster and more significantly if we acted later. Financial markets then would respond with higher volatility.

Nagel stated that Germany’s inflation, which is the largest of the 19 euro-zone economies, will likely exceed 4% in 2019. This is more than twice as high as the ECB’s 2% target, and far higher than the Bundesbank’s projection of 3.6%.

According to him, there were signs that rising energy prices might be longer-lasting. He also said that this was affecting prices of other goods, services and products. And that increasing demand could also be behind it.

Last week, the ECB warned of inflation risks. This suggests that prices could rise even in 2023. It is the third consecutive year that the ECB has done so.