Global economy faces delicate balancing act

As part of her regular SiriusXM Business Briefing appearances, London Business School Adjunct Professor Linda Yueh joined anchor Janet Alvarez on 17 June to discuss the global economy, monetary policy, the implications of the US-Iran conflict and the future of AI-driven infrastructure.

UK inflation came in lower than expected at 2.8 per cent, offering some relief to policymakers and reducing pressure for further interest-rate rises, according to London Business School's Dr Linda Yueh. While forecasters had anticipated higher food and energy costs linked to disruption in the Middle East, weaker economic growth appears to have offset some inflationary pressures.

Yueh noted that the Bank of England’s current rate of 3.75 per cent remains restrictive and that further tightening would be difficult for an economy showing signs of stagnation. She added that the reopening of the Strait of Hormuz would be critical for both the UK and Europe, helping to ease energy-related inflation, although uncertainty over regional infrastructure damage and food supply chains is likely to keep price pressures elevated.

Turning to geopolitics, Yueh said the economic consequences of the US-Iran conflict extend beyond oil markets. While an open Strait of Hormuz would support energy supplies and reduce immediate inflation risks, the longer-term impact on agricultural inputs and fertiliser production remains unclear. She warned that assessing damage to regional infrastructure will be crucial in determining how quickly supply chains can recover. For economies already experiencing weak growth, including the UK, any prolonged disruption could complicate the task facing central banks as they seek to balance inflation control with economic expansion.

Yueh also discussed the growing demand for AI infrastructure and the prospect of data centres in space, an idea being explored by SpaceX. She said advances in reusable rocket technology have dramatically lowered launch costs, making space-based manufacturing and computing more plausible than in the past. However, significant engineering challenges remain, particularly around cooling data centres in space and ensuring low-latency communications.

While she believes demand for data centres will continue to surge alongside AI adoption, Yueh suggested it remains uncertain whether space will become a major location for them. More broadly, she argued that today’s AI boom resembles past transformational technological revolutions more than the dotcom era, though investors should remain cautious about excessive leverage as markets attempt to value innovations whose full economic impact has yet to emerge.

Linda Yueh on the global economy, monetary policy, US-Iran conflict and Space X @1:20:15