The lattice dynamics in Sr$_2$RuO$_4$ has been studied by inelastic neutron scattering combined with shell-model calculations. The in-plane bond-stretching modes in Sr$_2$RuO$_4$ exhibit a normal dispersion in contrast to all electronically doped perovskites studied so far. Evidence for strong electron phonon coupling is found for c-polarized phonons suggesting a close connection with the anomalous c-axis charge transport in Sr$_2$RuO$_4$.
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