Inflation is rising. Is growth still holding up?

Resilient growth is giving central banks room to keep raising rates as energy-driven inflation persists, while elevated financing costs are testing AI valuations.

• The IMF raised its 2026 global growth forecast to 3.1%, mainly because of stronger expectations for Europe and India, supporting the view that earnings have a favourable macroeconomic backdrop.
• US consumer inflation rose from 3.4% to 3.7% in September, with energy prices up 10.8%; producer prices increased 6.3% year over year, their strongest rise in four years.
• Gasoline prices have stayed above USD 4 per gallon for almost half a year, and the article expects the Federal Reserve, the European Central Bank and the Bank of England to raise rates before year-end, with another Fed hike likely in December.
• AI-related equities came under pressure as investors questioned whether future revenues can justify debt-financed infrastructure spending and rising bond yields; technology-heavy South Korean and US markets declined while less technology-exposed European equities rose.
• Upcoming earnings from Meta, Procter & Gamble and Tesla, alongside October purchasing managers' indices and inflation data from the UK and Japan, will test whether profits and activity can withstand higher financing costs.

Takeaway: Investors should prepare for a more difficult combination of persistent inflation and higher rates despite resilient growth, while treating AI exposure cautiously because concentrated valuations leave little room for disappointing earnings.