By Farah Master and Marc Jones
HONG KONG/FRANKFURT (Reuters) - ECB policymakers sent a fresh round of inflation warnings on Monday, as euro-zone data showed the region's economic recovery remained robust and likely to keep upward pressure on prices.
ECB policymakers have sounded increasingly aggressive on inflation this year since it topped the bank's target of just under two percent.
Speaking late in Frankfurt, Juergen Stark, one of the ECB's inflation hardliners, added to the message.
"In my view, risks to the medium-term outlook for price developments in the euro area as a whole could move to the upside," he said in a speech at the Goethe university
"The latest economic developments suggest that the monetary policy of the ECB that has already been accommododative has become even more accommodative."
In Hong Kong, ECB board member Lorenzo Bini Smaghi said the 17-country euro zone was enjoying better-than-expected economic growth, but warned rising prices were becoming a concern and that higher food and energy prices may be something economies have to get used to.
"Inflation is higher than expected because of global events. We all have to understand to what extent this higher inflation is due to temporary or a longer underlying phenomenon," he said.
"There is pressure on prices of agricultural products and this may not be a temporary phenomenon, it may be a permanent one, the same for energy."
Financial markets have been gradually bringing forward the date at which they expect the ECB to start hiking rates.
Economists polled by Reuters see it waiting until the final stages of the year although traders and investors see a move as early as the middle of the year.
Athanasios Orphanides, another ECB policymaker, struck a similar tone in an interview with the Wall Street Journal on Monday, saying it could not be ruled out that euro zone inflation will stay above the ECB's target of just under 2 percent for longer than expected.
Fresh data on manufacturing and German sentiment published on Monday backed the central bank's belief that the euro zone recovery remains on firmly on track.
Activity in the euro zone's factories and private sector grew faster than expected this month and is pushing up prices, new data showed.
German business sentiment also improved in February. The closely watched Ifo index hit a record high, signaling Europe's largest economy is still carrying strong momentum despite recent spending cuts and slower growth elsewhere in Europe.
SECOND ROUND BOUND?
The euro is up more than 6 percent since the ECB's January meeting when it first adopted its sharper tone on inflation.
Bini Smaghi has delivered a string of speeches in recent weeks warning that the rise of oil, commodity and food prices is likely to be more than just a temporary spike.
On Friday, he said the ECB could use its monetary policy in a pre-emptive fashion to head off inflation and on Monday sent a fresh reminder that the bank had one aim -- to avoid inflation getting out of control.
"In our case, we (the ECB) have a clear objective which is to look at inflation and to avoid inflation," he said.
The latest comments helped the euro hang on to most of last week's gains against the dollar and stoked expectations further that the ECB may raise interest rates before the U.S. Federal Reserve.
While the ECB acknowledges nothing can be done to slow fuel, food and commodity prices, it sees its role as ensuring the rises do not lead to so-called second-round effects like over-inflated wage deals that trigger a wider trend that disrupts the economy.
Austrian central bank Governor Ewald Nowotny said in an interview over the weekend that the ECB was watching inflationary developments very closely but that at present there appeared to be no sign of second-round effects.
Stark also said the ECB remained watchful. However, Germany's Bundesbank warned there were signs of potential problems on the horizon.
"There are some first signs, above all in the more (cyclically) advanced euro zone countries, that over the course of the year there could be a further strengthening in wage growth and as a result price rises in services and commercial goods," it said, adding it saw inflation at 2 percent or above for much of the year.
MARCH MEETING
The ECB's next meeting on March 3 is expected to go a long way in shaping expectations about future rate hikes and the bank's general policy direction.
Its 23 policymakers will decide whether or not to resume winding in crisis support measures, while its in-house economists will update inflation and growth projections for the next two years. (for previous forecasts click)
Bini Smaghi said he would not comment on whether the ECB would upgrade inflation targets.
On the political side, he said reforms needed to be implemented in euro zone countries in which growth was slower, adding that Italy needed to adopt reforms to stimulate growth, and its budget needed further cuts to stabilize debt.
Commenting on whether a single fiscal policy would be beneficial to the entire euro zone, he said he does not think such a policy is appropriate and that "decentralized policy is not necessarily bad."
He encouraged banks in the euro zone not to be "too easy-going," and urged them not to rely on ECB credit, and to return to capital market as soon as possible.
Orphanides also urged the euro zone's politicians to ramp up measures to ensure there is no re-run of the bloc's debt crisis.
"The longer our political leadership delay agreeing on a framework that will ensure stability, the greater is the threat that we may have another crisis similar to what we experienced in 2010," he said.
(Additional reporting by Mike Shields in Vienna; editing by Stephen Nisbet)
