FRANKFURT Feb 16 A sudden increase in interest
rates would hurt bank profits, even if it would be beneficial in
the long run, a director at Germany's central bank said on
Carl-Ludwig Thiele's comments to an audience of German
bankers showed the Bundesbank was resisting calls from within
its own country for a tightening of the European Central Bank's
monetary policy in the face of rising inflation.
"If the interest rate should rise abruptly after a long
low-interest period, a sharp drop in earnings before taxes must
be expected in the short term," Thiele said. "In the medium
term, interest expenses could also rise faster than interest
He added: "In the long term, however, we believe that an
increase in interest rates would lead to a recovery and
stabilization of the banking sector."
(Reporting By Francesco Canepa)