One of the most senior members of the European Central Bank (ECB) Governing Council has warned that "highly restrictive" interest rates could damage the Eurozone economy and believes there is justification for two more rate cuts this year.

The Governor of the Bank of Greece, Yannis Stournaras, said on Wednesday that Eurozone inflation is expected to reach the ECB's 2% target in the first half of 2025, which strengthens the argument for policymakers to lower "highly restrictive" interest rates at a faster pace than previously anticipated.

Stournaras stated that he supports two more rate cuts this year, the first at the ECB meeting in Slovenia next week, and the second at the final meeting in December this year, following the latest Eurozone economic activity and inflation data which significantly undershot expectations.

"Even if we cut rates by 25 basis points now and again in December, rates would only return to 3% - still in the highly restrictive territory," Stournaras told the Financial Times, adding that there is a justification for further policy easing in 2025.

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Stournaras noted that "confidence indicators are at a critical juncture," and "inflation is falling faster than we (ECB) forecasted in September," adding: "The latest data suggest that perhaps we will cut rates to 2% in the first quarter of 2025."

Eurozone inflation fell to 1.8% in September, the first time it has been below the ECB's target since 2021. However, due to statistical base effects, such as the gradual elimination of lower energy prices from year-on-year comparisons, consumer price growth is expected to accelerate in the final months of this year.

The ECB has set a "medium-term" inflation target of 2%, as strong wage growth and elevated service sector inflation remain a concern.

The ECB began easing its restrictive monetary policy in June this year and cut rates again in September. If it lowers rates from 3.5% in October, it would mark a departure from its path of cutting rates by 25 basis points every other meeting.

The Governor of the Bank of Greece, a former academic economist and one of the longest-serving members of the 26-member ECB Governing Council, believes that medium-term inflation trends indicate room for faster rate cuts. He said: "If inflation continues to move towards the 2% target, why not cut rates at every meeting?"

ECB President Christine Lagarde hinted last week that the likelihood of a rate cut in October has increased, telling Members of the European Parliament in Brussels that rate setters would take into account the higher-than-expected decline in inflation.Financial markets currently anticipate that the European Central Bank (ECB) will cut interest rates twice more this year and predict that by the second half of next year, rates will drop to around 1.7%. The majority estimate that the "neutral" interest rate, which neither stimulates nor slows economic activity, is around 2%.

According to Stournaras, few members of the ECB's Governing Council are completely opposed to the ECB's recent policy path. He stated, "We are all looking at the same data, which indicates that we will achieve the 2% (inflation target) by mid-2025 (or even earlier). Otherwise, we risk significantly downgrading our economic growth forecasts and potentially pushing inflation below the target level." He added that this would mean reverting to the "old problem" of too-low inflation, "which nobody wants."

Although the ECB may have to intensify its easy monetary policy, Stournaras indicated that the ECB is not behind the curve. "We must act step by step," he said, adding that economics is a "social science" rather than "quantum mechanics," and policymakers must make decisions in the face of great uncertainty. "No one knows what will happen tomorrow."