ECB Noyer: Weak Monetary Policy Impact On Inflation Surprising

European Central Bank Governing Council member Christian Noyer said Saturday that while it was “very exaggerated” to talk about deflation in the Eurozone, the weak impact on inflation from easing measures taken so far remained surprising.

Speaking at the Cercle des Economists conference in Aix-en Provence, Noyer said that very low global inflation was one of the paradoxes of the current economic environment.

“Everywhere in advanced countries monetary interest rates have been brought to levels close to zero. The balance sheets of central banks have exploded from the effects of assets purchases and liquidity operations,” Noyer said. “Despite this, inflation in all these countries remains at a level judged to be insufficient, or indeed dangerously low,” he said.

In the Eurozone, despite the ECB’s efforts, inflation has fallen continuously for more than six months, Noyer said. “If it is very exaggerated today to talk about deflation, the weak impact of the monetary easing is surprising,” he said, adding that price increases across the Eurozone remained “too low.”

Noyer, who heads the Bank of France, also warned governments not to try to spur economic growth with infrastructure projects financed with debt.

“No country today has sufficient credibility to put in place such a strategy,” he said. “The current balance is fragile and any significant deviation from the budget trajectory would result…in much higher interest rates,” he added.

In a separate interview published Saturday in the French magazine Investir, Noyer said it would be “logical” for the euro to decline somewhat against the dollar.

“It would be logical, given the lagging cycling with the United States, for the euro to depreciate a little,” he said.

Noyer reiterated that the single currency was not a target for the ECB, but was still “an element that weighs heavily on economic activity and inflation.”