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Noyer says ECB won't passively accept below-target inflation

Published 28/10/2014, 16:07
© Reuters Bank of France Governor Noyer arrives for a G-20 finance ministers meeting during the World Bank/IMF annual meetings in Washington

PARIS (Reuters) - The European Central Bank will not accept inflation remaining stuck below target, governing council member Christian Noyer said on Tuesday.

Noyer, who is also governor of the Bank of France, said forecasts suggest euro zone inflation would "without a doubt" stand at around only 0.6 percent by the end of the year, far below the ECB's target of just under 2 percent.

"We do not passively accept at the ECB that inflation is too weak in relation to our target," Noyer said during a hearing at the French Senate.

Inflation across the 18 countries that use the euro fell in September to a nearly five-year low of 0.3 percent, a level Noyer described as "very uncomfortable".

Eager to ward off the threat of deflation, the ECB has ramped up its monetary policy actions and is considering further exceptional measures to boost growth, which would in turn push inflation higher.

Asked about the prospect of the ECB expanding its asset purchases to include government debt, Noyer said that would be trickier in Europe than it was in the United States because of the fragmented nature of the bond market.

Noyer said the ECB hoped that inflation would gradually return to 1.5 percent over the course of next year before slowly approaching its target.

Nonetheless, Noyer would not rule out the risk of deflation emerging in the euro zone even if the prospect was not in the ECB's forecasts.

"We are not in deflation and we don't forecast deflation but there is always a risk," Noyer said.

© Reuters. Bank of France Governor Noyer arrives for a G-20 finance ministers meeting during the World Bank/IMF annual meetings in Washington

In a similar vein, ECB chief economist Peter Praet said in comments published on Tuesday in the Belgian press that the risk of deflation was limited.

(Reporting by Leigh Thomas; Editing by Ingrid Melander and Catherine Evans)

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