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UPDATE 1-Price stability risks very limited -ECB's Noyer

Published 10/12/2010, 04:34 AM
Updated 10/12/2010, 04:36 AM

(Adds Noyer quotes)

PARIS, Oct 12 (Reuters) - Direct intervention in debt markets must remain the exception to the rule although central banks do need to ensure they have "efficient" markets, European Central Bank policymaker Christian Noyer said on Tuesday.

Speaking at a stock market conference, Noyer, a member of the bank's governing council and the head of France's central bank, added that upward risks to price stability remained very limited.

The ECB's bond buying -- part of efforts to stabilise markets since Greece's debt crisis -- slowed to a near halt last week, after it bought almost 1.4 billion the previous week.

"Since 2008, the active presence of almost all central banks on a wide range of market segments could suggest that direct market intervention have become the general modus operandi of central banks," Noyer said.

"This is far from being the case ... central banks require efficient markets to fulfil their mandates and this can lead to massive direct interventions in markets, but these interventions must remain exceptional.

Referring to the ECB's goal of keeping price rises below, but close to 2 percent over the medium term, Noyer also said:

"Price stability was not and is still not in question in the euro area. Following a period in which prices declined, largely due to developments in energy prices, we are steadily returning to a configuration that is more consistent with our definition of stability."

(Reporting by Vicky Buffery and Jean-Baptiste Vey, Writing by Brian Love; editing by Patrick Graham)

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