Central bankers can continue to ease monetary policy even when interest rates are at zero, and should do so if they sense the threat of deflation, a member of the European Central Bank's Governing Council said on Saturday.

Athanasios Orphanides, who also is governor of the Central Bank of Cyprus, said in prepared remarks to a monetary conference sponsored by the Federal Reserve and the ECB that the nominal level of interest rates means nothing if policy-makers ignore the underlying level of prices in the economy.

The degree of monetary policy ease should be associated with the level of real interest rates, not nominal interest rates, said Orphanides,

Near-zero policy rates that may be considerably expansionary in an economy with high inflation could be contractionary when inflation is too close to zero, or worse, deflation has set in.

(Reporting by Pedro Nicolaci da Costa, Editing by Chizu Nomiyama)