THE Bundesbank does not need to cut its interest rates in the current climate but if conditions changed, the bank would act accordingly, its chief economist Mr Otmar Issing said yesterday.

"A reduction of rated is not needed under current conditions. If these conditions changed, we would study the situation and act accordingly," he said in a magazine interview.

These remarks appeared to qualify a recent statement in which Mr Issing said that a rate cut was not needed and should not be expected.

This was taken as implying that the cycle of cuts in German rates had come to an end and sparked a sharp rise of the D mark.

Bundesbank sources then said that Mr Issing has been misinterpreted and that he had been referring to the short and medium term.

Since then, the president of the Bundesbank, Dr Hans Tietmeyer has also implied that a further cut of rates should not necessarily be ruled out.

The rise of the D mark was accentuated on Tuesday by reaction to a report that Germany would overshoot limits for qualification to participate in the introduction of a single currency.