FRANKFURT, Feb 16 (Reuters) - 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 Thursday.
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 income.”
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)