ECB's Rehn: High yields to dampen energy price pass — through

HELSINKI, Oct 6 (Reuters) — Rapid energy inflation across the euro zone has not yet spread to other goods and services, and the recent rise in bond yields is likely to dampen price pressures as it weighs on growth, European Central Bank policymaker Olli Rehn said on Tuesday. Euro zone inflation is now running well above the ECB’s 2% target, and policymakers are debating just how much more they need to hike rates on top of the two moves this past summer. While a host of policymakers have said that inflation risks are tilted to higher readings than predicted, Rehn said there were other considerations, too, as opposing forces were at work in the economy. "The rise in long-term interest rates is contributing to a slowdown in growth and also to a reduction in the pass-through of energy prices to other prices and to wages," says Rehn said, echoing some of ECB chief economist Philip Lane's comments. ECB board member Isabel Schnabel, an outspoken policy hawk, has also warned recently that the economy could respond more to surging borrowing costs more strongly than assumed, which would dampen medium-term inflationary pressures. Yields have risen to more than decade highs across the bloc,.