PARIS: The eurozone is at risk from unduly low inflation, the governor of the French central bank Christian Noyer, who also sits on the policy body of the European Central Bank, warned on Monday.
A second challenge for the eurozone is the strength of the euro, which was "one of the factors pushing inflation down," Noyer said.
But "low inflation does not mean deflation", Noyer underlined, saying that deflation meant "a pernicious spiral" marked by a "permanent and cumulative process" of falling prices.
Inflation in the eurozone fell from 2.7 percent at the end of 2011 to 0.5 percent in March on a 12-month comparison, the central bank noted.
The ECB has a target for medium-term inflation of just below 2.0 percent.
There is widespread concern that deflation, an absolute fall in prices, threatens the eurozone and the ECB central bank has said that it is watching these pressures carefully and is ready to take counter measures.
Economists hold that deflation is particularly dangerous if it takes hold because consumers and businesses delay purchases in the belief that prices will fall further.
This further depresses demand and prices and pushes up unemployment, and can creat a vicious circle.
Noyer, presenting the French central bank's annual report, warned of the pressures of disinflation, which happens when the rate of inflation slows sharply.
Reforms by several governments in the eurozone to cut public budget deficits and debt, and a rise in the competitive position of some eurozone countries, had combined to create "powerful disinflationary pressures", Noyer said.
The big challenge for the 18-member eurozone was "the risk of inflation which is too weak for a lasting period", he said.
"Temporary and global factors are at work, import prices are falling, particularly for raw materials and energy," he said in a letter with the annual report for French President Francois Hollande, and for the French Senate and National Assembly.
"More permanent and deeper forces are at work: unused production capacity continues to have a big effect and powerful disinflationary pressures arise from the process of debt-reduction in the private and public sectors, and the renewal of competitive positions through a fall in prices and pay in the countries most affected by the crisis," he wrote.
Noyer said that unduly low inflation carried with it "very significant" dangers and risks, mainly because it raised the chances of an economy tipping into deflation if an unforeseen blow fell upon it.
On the exchange rate of the euro, which the French government and some opposition forces hold is a handicap for French exporters, Noyer said that the ECB's monetary policy was not the cause of the strength of the euro.
This was because no policymaker set the exchange rate as a target, and because the ECB's policy was as relaxed as was the policy of the US Federal Reserve central bank.
Noyer said that "it would appear that in the recent past, large amounts of capital have been redeployed away from emerging countries towards markets in the eurozone, particularly on its periphery" and this had had the effect of pushing the euro up.
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