FRANKFURT (dpa-AFX) - Deutsche Bank CEO Christian Sewing believes further interest rate hikes are "absolutely" necessary in the fight against high inflation. "Inflationary risks remain high. The cost of energy can easily rise again, and the opening of China can also give prices a temporary boost," Sewing told the Welt am Sonntag newspaper.

The European Central Bank (ECB) had raised interest rates in the euro zone for the fifth time in a row at the beginning of February and held out the prospect of a further increase of another 0.5 percentage points for its meeting on March 16. The key interest rate in the euro area now stands at 3.0 percent. The deposit rate, which commercial banks receive when they park money with the ECB, is 2.5 percent.

Higher interest rates make loans more expensive. This can slow demand and thus counteract high inflation rates. At the same time, higher interest rates on loans can lead to investments being postponed and thus to weaker economic growth.

Rising interest rates are also a burden for highly indebted euro countries such as Italy. "The consequences of sustained high inflation are much more serious than higher financing costs for some countries," Sewing said. "Of course, we have to keep that in mind, but high debt levels should not prevent the ECB from acting consistently."

The ECB aims for price stability in the euro area over the medium term at an inflation rate of two percent. This target has been a long way off for months. In January, inflation weakened again, but consumer prices in the currency area of now 20 countries were still 8.5 percent above the level of the same month last year.

Higher inflation rates reduce consumers' purchasing power, as they can then afford less for one euro. Sharp rises in energy prices, which are a major driver of inflation, are also a burden for companies.

If inflation remains high, private consumption will "sooner or later collapse," warned Sewing, who is also president of the Association of German Banks (BdB). "This is where I currently see the greatest danger for the German economy. But I am optimistic that we can avoid this scenario."/ben/DP/he