Low inflation keeping financial conditions tight - ECB's Noyer
PARIS (Reuters) - Low euro zone inflation is helping to keep financial conditions in the bloc restrictive, threatening its broader economic recovery, ECB policymaker Christian Noyer said on Tuesday.
Noyer said euro area countries had seen strong capital inflows in recent months that have helped lower borrowing costs, but also boosted the euro's exchange rate, and it was not clear whether the overall effect was positive.
"While nominal conditions are more accommodating in the euro area than in the U.S., real indicators point to a more restrictive stance," he told a banking industry conference.
Noyer, who is also governor of the Bank of France, said the euro zone may see a "perverse feedback loop" arise as low inflation raises real interest rates, attracting capital inflows, which in turn boosts the exchange rate.
"The financial economy may be heading towards a bad equilibrium that would threaten the real economic recovery," he added.
Against that background, Noyer said that the ECB stood ready to "take any actions that may prove necessary should downside risks further materialise."
(Reporting By Leigh Thomas; editing by John Irish)
