TALLINN, Aug 30 Reuters Euro zone inflation is falling as predicted, easing the risk that further rate cuts would derail disinflation, but the European Central Bank must become increasingly cautious as rates go lower, ECB board member Isabel Schnabel said on Friday.

The ECB is widely expected to cut interest rates again next month given easing price pressures, and Schnabel39;s comments are likely to bolster those bets since the bank39;s baseline already assumed two more rate cuts this year after June39;s initial cut.

Recent data remain consistent with the baseline scenario that foresees that inflation will sustainably fall back to our 2 target by the end of 2025, Schnabel told a lecture in Tallinn, Estonia.

While Schnabel did not directly argue for policy easing, she said further gradual rate cuts might not derail the disinflation process as some policymakers had feared.

Along with signs of a potential decline in economic momentum in other parts of the world, there is less risk that a further moderate and gradual dialling back of policy restraint could derail the path back to price stability, Schnabel added.

Speaking alongside Schnabel, Finnish central bank chief Olli Rehn said that weaker economic growth raises the case for a September rate cut while Latvia39;s Martins Kazaks agreed that the baseline was on track.

Still, Schnabel, an influential voice among the more hawkish policymakers who drove the ECB39;s steepest ever streak of interest rate hikes in 202223,…