ECB's Lane says will consider oil recovery for inflation outlook

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By John Geddie and Padraic Halpin

DUBLIN, May 19 (Reuters) - The European Central Bank will be taking the recent rise in oil prices into close consideration when it meets next month to consider its inflation forecasts, ECB governing council member Philip Lane said on Thursday.

The ECB slashed its outlook for consumer price growth in March based on estimates for Brent crude averaging around $35 a barrel this year. Since then, the price of oil has risen over 20 percent and was trading at $48 a barrel on Thursday.

Updated staff forecasts are due to be released at the ECB's next meeting on June 2.

"Clearly it is an interesting development," Lane told reporters on the sidelines of an event in Dublin.

"The recovery in oil prices is recognised, but the assessment has to be how durable that recovery is and the implications for our inflation forecasts over the medium term."

Some members of the Governing Council do not expect the oil price to hold up. Lithuanian central bank chief Vitas Vasiliauskas told Reuters on Wednesday that oil prices have fluctuated greatly in recent months so he did not think the current rally was sustainable.

The ECB cut its 2016 inflation projection to 0.1 percent from 1.0 percent in March and lowered the 2017 forecast to 1.3 percent from 1.6 percent.

The record of the ECB's policy meeting last month, released on Thursday, suggested the rate setters were more optimistic about the economy but remained concerned that low oil prices might undermine wages and other prices.

Even (Taiwan OTC: 6436.TWO - news) with the oil rebound, market measures of long-term inflation expectations have not signaled a faster return to the ECB's target of near 2 percent.

The ECB minutes also noted that the central bank does not "mechanically" react to changes in its three-year staff inflation forecast and takes a more flexible approach when assessing the "medium-term" outlook.

"It (Other OTC: ITGL - news) is natural...that with the sharp plunge we saw earlier in the year we will see some recovery now. So clearly we will be looking at that development," said Lane. (Reporting by John Geddie and Padraic Halpin, editing by Andy Bruce and Hugh Lawson)