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PARIS, July 3 (Reuters) - Central banks around the world should not lose sight of their main mandate of keeping prices stable but must do more to promote financial stability, ECB Governing Council Member Christian Noyer said on Friday.
While a number of factors had helped spur the ongoing economic crisis and monetary policy could not be held responsible, central banks could play a greater role in avoiding a repeat of credit bubbles, Noyer told a forum.
Any dilution of the fundamental mandate of maintaining price stability would be "extremely detrimental" to global prosperity in the long term, Noyer said, adding that there was a good case for pushing financial stability higher up the policy agenda.
"When assessing the economic and financial environment, central banks should take a longer term perspective and be more alert to incipient financial imbalances," he said.
While the Eurosystem was well equipped to adopt such an approach, given ongoing efforts to monitor the dynamics of money and credit aggregates, more needed to be done, he said.
It was now widely accepted that central banks needed to take a macroprudential approach when implementing financial supervision, he said. Noyer gave no hints on the direction of future monetary policy in the euro zone in a speech which also sought to assess whether monetary policy was responsible for the crisis.
Partially rejecting arguments put forward by critics, Noyer said current problems were triggered by macroeconomic imbalances whose causes appeared "more real to me than monetary."
Inflows of capital into the United States, the primary supplier of liquid and safe assets, had highlighted global imbalances as excess demand for U.S. assets had boosted prices and triggered financial bubbles, he said.
The development of financial markets in countries with surplus capital would go a long way to solving such a problem by reducing the asset shortage, and thus the probability of future bubbles, Noyer said.
Central banks had played a decisive role in limiting the impact of the crisis, he said, stressing that they had acted rapidly and in cooperation with one another.
"In the period to come, however, steering the economy in an environment of high uncertainty will prove particularly challenging," he said. (Reporting by Tamora Vidaillet and Michel Rose; Editing by Toby Chopra)