MARRAKESH Inflation in Germany is on a downward trajectory, Bundesbank President Joachim Nagel said on Friday on the sidelines of an International Monetary Fund meeting in Marrakesh.

"It seems we have passed the peak of inflation," Nagel told reporters, speaking alongside German Finance Minister Christian Lindner.

"The 10 interest rate hikes - and this is crucial from the central bank's point of view - are having their effect," he said.

Nagel said it was now important to look at the impact of monetary policy on the economy, adding: "But overall, I am satisfied with how monetary policy is working."

The impact of the energy crisis combined with high interest rates and weak global demand for exports have weighed on Europe's largest economy, which is expected to shrink by 0.4% this year, according to a government forecast.

But both Nagel and Lindner stressed that Germany was not the sick man of Europe, as some analysts have suggested.

Nagel pointed to a robust labour market with strong wage growth, and said consumption was expected to pick up as inflation eases.

The Bundesbank chief sees inflation easing to 2.7% by 2025 and said he would be satisfied with just over 3% by the end of next year.

(Reporting by Andrea Shalal, Writing by Rachel More, Editing by Friederike Heine and Matthias Williams)