TALLINN/BRATISLAVA (Reuters) - Euro zone inflation could overshoot the European Central Bank's projections as the price of crude oil surges on the back of a production cut decided by key exporters, two ECB policymakers said on Tuesday.
The ECB has been trying for years to revive inflation, a gauge of economic growth, in the euro area by stimulating lending and said last week it would keep buying bonds, albeit at a reduced pace, until the end of next year based on its new inflation forecasts.
A faster-than-expected rise in energy prices would be a mixed blessing for the ECB as it would drive up inflation without necessarily benefiting economic activity in the euro zone, a net importer of oil.
"There is certainty more (inflation) upside than we would have thought ... because the forecast was based on data up to the 24th of November," Estonian governor Ardo Hansson told a news conference in Tallinn.
"Knowing what we know today, the outlook for inflation has upside risks."
Since then, oil producers have agreed an output cut and Brent crude <LCOc1> has risen 14 percent to its highest level since mid-2015 <EUIL5YF5Y=R>, while market-based inflation expectations are at a one-year high.
Speaking in Bratislava, Slovak governor Jozef Makuch also noted positive risks to inflation but cautioned it was not clear how long the OPEC supply cut would last.
The ECB last week extended the bond-buying program by nine months but unexpectedly cut its monthly purchases to 60 billion euros from 80 billion euros from April, arguing the risk of a fall in prices had largely disappeared.
Responding to critics who argued that the ECB had reneged on its promise to maintain monetary accommodation, Hansson said keeping purchases at the same rate would have increased stimulus given the bank's already huge, 3.6 trillion euro balance sheet.
Hansson's comments point to a debate within the ECB on the future of the asset purchase program.
Hawkish policymakers argue that a commitment to maintaining an accommodative policy is related to keeping an oversized balance sheet, while doves say the issue is the monthly pace of the purchases.
"In order to preserve accommodation when our balance sheet is already the size it is, reducing the volumes is totally consistent with preserving the stance," Hansson said.
Makuch added the ECB was ready to change the program again if necessary.
"It is not a problem if the situation changes to decide on other technical adjustments of the program if needed," he told a news conference.
(Reporting by David Mardiste and Tatiana Jancarikova; Writing by Balazs Koranyi and Francesco Canepa; Editing by Tom Heneghan)