By David Barwick – FRANKFURT (EconoStream) – Weak demand will continue to depress inflation over the medium term, European Central Bank Governing Council member Pablo Hernandez de Cos said on Thursday.

Speaking at a webinar of the Economic and Social Council, a Spanish government advisory body, de Cos, who heads the Bank of Spain, said that both observed and expected inflation are at ‘very low levels’, and that ‘it is to be expected that in the medium term, the weakness of demand will continue to put downward pressure on the evolution of prices’.

This is why the Governing Council considers necessary ‘a high degree of monetary accommodation to support the recovery and safeguard our price stability objective’, he said.

De Cos repeated the ECB’s commitment to do whatever is necessary to support the euro area ‘at this extremely difficult juncture’, and in particular to ensure a properly functioning transmission mechanism and to avoid fragmentation. To this end, the ECB stands ready to adjust all its instruments, he said.

The ECB’s pandemic emergency purchase programme (PEPP) is being deployed with high flexibility, ‘so that the Eurosystem is centring its purchases where they are most needed at each moment’, he said.

In other comments, he urged that authorities keep close watch over threats to financial stability and that they be ‘ready to respond forcefully at the level of Europe in case these materialize.’