Energy prices are moving the euro zone closer to the ECB's (euro zone central bank) adverse inflation scenario, Finnish central bank chief Olli Rehn said. Inflation has risen above 3% in recent months and could approach 4% by year-end, twice the ECB's target, increasing pressure for further rate increases after two hikes this summer. Rehn said higher long-term borrowing costs could slow growth and reduce the pass-through of energy costs into other prices and wages, leaving inflation and growth forecasts exposed to very high uncertainty. Government borrowing costs have risen partly because of higher US yields linked to concerns over Washington's fiscal policy and because major technology companies are issuing record debt to fund artificial intelligence investment, competing with sovereign borrowers. Germany's 10-year borrowing cost reached 3.57%, a 17-year high, while the comparable US yield stood at 5.32%. Rehn also warned that elevated technology valuations create a financial-stability risk and that a sharp correction in AI-related valuations could spread through equity and credit markets. Despite the energy shock, the euro zone economy has remained more resilient than expected, with growth holding up better than feared.