UPDATE 1-ECB's Noyer says seems deflation risk has been avoided

Sat Jul 5, 2014 11:01am EDT

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AIX-EN-PROVENCE, France, July 5 (Reuters) - European Central Bank (ECB) policymaker Christian Noyer said on Saturday it seemed that the risk of deflation had been avoided in euro currency zone, even if inflation remained too low.

The euro zone inflation rate held at a rate of 0.5 percent last month, well below the ECB's target of close to, but below, 2 percent and within what ECB President Mario Draghi has called the "danger zone".

Noyer said it was a paradox that inflation remained weak despite very accommodative monetary polices, adding: "Even if the risk of deflation seems to have been avoided, we have ... price increases that are too low."

Draghi had said on Thursday that a raft of policy measures introduced last month would help lift inflation and support bank lending but the ECB stood ready to create money if required.

Noyer, who was speaking at an economic conference in the southern France city of Aix-en-Provence, also said questions remained on growth in China. U.S. "dynamism" had so far not been as high as expected, while Europe "struggles to take off," he said. (Reporting by Ingrid Melander; Editing by Kevin Liffey and David Holmes)

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