ECB's Rehn sees no broad inflation spread from eurozone energy prices

European Central Bank policymaker Olli Rehn stated that the rapid energy inflation in the eurozone has not yet spread to other goods and services. He noted that rising bond yields could help reduce price pressures by slowing economic growth, according to a report by Reuters.

Eurozone inflation remains above the ECB's 2% target, leading to discussions on potential further interest rate hikes following two increases this summer. While some policymakers warn of upside inflation risks, Rehn pointed out opposing economic forces that may limit additional price pressures.

Rehn highlighted that higher long-term interest rates are contributing to slower economic growth, reducing the impact of rising energy costs on consumer prices and wages. ECB Chief Economist Philip Lane and board member Isabel Schnabel have also discussed the potential impact of tighter financial conditions on inflation.

Eurozone government bond yields have reached their highest levels in over a decade, partly due to rising U.S. Treasury yields and debt sustainability concerns in some European countries. Rehn did not signal support for a specific policy move, maintaining the ECB's stance of avoiding forward guidance on interest-rate decisions.

Financial markets anticipate another two to three rate increases during the current tightening cycle, with an 80% probability of a hike by December. Rehn acknowledged elevated energy prices but noted the eurozone economy's resilience, supported by strong investment in artificial intelligence.