The world economy has gained momentum in Q3. Business surveys have improved, trade is booming amid the AI buildout, and consumption has been resilient to high energy prices. Meanwhile, jobs growth has stabilised in most DMs and rising bond yields have had only a small effect on private sector borrowing costs. Provided that energy prices do not take another leg up from here, the signs are that the world economy will continue to muddle through. But more damage to key energy infrastructure, or a US diesel export ban, would tighten energy markets and send prices higher. In addition to denting real incomes, another burst of inflation would lead most DM central banks to hike interest rates by more than we currently expect.
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