* Noyer sees "permanent and deep forces" weighing on
* Euro strength adding to downward inflation pressures
(Adds details on ECB action)
PARIS, March 10 Price stability is under threat
in major economies from low inflation, warranting action by
central banks, ECB policymaker Christian Noyer said on Monday.
Noyer, the governor of the Bank of France, warned that
"permanent and deep forces" were weighing on inflation in the
euro zone and wider world.
"Monetary policy should remain active because persistently
low inflation threatens the achievement of price stability as
commonly defined by all major central banks today," Noyer told a
conference at the French central bank.
Noyer cited slack in many economies as a source of low
inflation, as well as deleveraging in the euro zone, where many
countries are slowly working off excessive debt.
"The recent appreciation of the euro has had indeed a strong
disinflationary impact," Noyer added. The euro rose in recent
days to 1.39 to the dollar, its highest since late 2011, after
the European Central Bank left its monetary policy unchanged on
The Eurostat EU statistics agency estimated euro zone
inflation held steady in February at 0.8 percent, well below the
ECB's target of close to but less than 2.0 percent.
Noyer said he did not currently see deflation - what he
described as a "pernicious spiral" downward in prices that
chokes consumption and investment - in the euro zone and that
inflation expectations were firmly anchored in positive
The ECB's inflation target was meant to provide a cushion
against negative shocks to the economy that could drive
inflation lower, Noyer said. The euro zone was vulnerable
without a buffer, he said.
Against that background, the ECB's Governing Council has
made it explicit that its members expect to keep interest rates
at current or lower levels for an extended period of time.
Such forward guidance is a relatively new tool the ECB has
called on to influence the economy. Noyer said it was unlikely
central banks would go back to relying solely on their
conventional tool, short-term interest rates.
But even with more levers available to central banks than in
the past, Noyer warned that there were limits to what monetary
policy could do.
"The longer interest rates are kept at low levels, the
greater the risk for financial stability," he said.
(Reporting by Leigh Thomas; Editing by Larry King)