LUXEMBOURG, Dec 12 (Reuters) - The European Central Bank sees the current economic slump continuing in the coming quarters, Governing Council member Yves Mersch said on Friday.
"The council of governors estimates that the weakness of global economic activity and the strong fall-off of domestic demand will persist for the next quarters," he wrote in a foreword of the Luxembourg central bank's twice yearly bulletin.
Mersch said ECB policy makers expected the slowdown to last for some time and, like the ECB staff, Mersch predicted a recovery in the economy assuming the financial turmoil subsided and raw material prices remained low.
The ECB's in house economists cut their forecasts for 2009 euro zone gross domestic product (GDP) earlier this month to between -1.0 percent and 0.0 from a previous 0.6-1.8 percent. (for full details please click [ID:nL4747478])
The head of the Luxembourg central bank said the level of uncertainty stemming from the current financial market havoc remained exceptionally high and would hit consumer demand for a lengthy period of time.
He added that inflation, which raced up in the first half of the year and is now plunging, would eventually stabilise at the ECB's target level of just under 2 percent.
"The pursuit of a lessening of inflationary tension is confirmed and, looking forward, the inflation rates should conform to the price stability horizon relevant to monetary policy, this development supporting real purchasing power."
Mersch said the fall of inflation was linked to the retreat of the prices of commodities and raw materials and the broader slow down in the economy.
He said the intensification of financial turbulence would temper demand for a "prolonged period", both globally and in the euro zone.
"At the same time, while still remaining high, the underlying rhythm of monetary expansion has continued to moderate," he said. (Reporting by Philip Blenkinsop; Editing by Toby Chopra)