The IMF, each April and October, releases the World Economic Outlook, and most readers go straight to the numbers. The latest report shows world growth of 3.1% for this year, inflation at a high of 4.7%, and India growing at 7%. On a second reading, though, the report says a lot about something it never names directly: how people behave when they do not know what comes next.

The report is titled "Resilience Under Strain". The question worth asking is how much of that resilience is real, and how much of it rests on what markets have chosen to believe.

Start with crude oil. When the Strait of Hormuz closed earlier this year, the prices of crude nearly doubled. A few months later, they were only 20%-40% above pre-war levels. The IMF says prices came down because markets judged that a resolution would come soon enough. That is a belief, not a fact. Oil futures still price Brent crude back near $79 by the end of 2027, and the IMF's own forecast assumes Hormuz will start reopening in March 2027.

Maybe it will. But the report itself warns that if the conflict drags on, people may start seeing it as lasting, and prices would then rise along the whole futures curve, not just for near delivery. Global oil stocks are already falling by about 2.7 million barrels a day. When a widely-shared belief like this breaks, it tends to break quickly.

The most useful part of the report for anyone in the bond market, however, is its work on commodities. The IMF has a daily tracker that splits oil price moves into two kinds: those caused by barrels actually going missing, and those caused by fear that they might. Price increases driven by fear usually fade within six months to a year and barely touch jobs. Rises driven by real shortage are larger and last longer. During the Ukraine war in 2022, fear moved oil more than twice as much as actual supply loss did. In this year's conflict, the two have counted for roughly the same.

Anyone who has sat through a volatile trading day knows how this plays out. A tanker attack or a closed strait stays in the mind and feels bigger than it may be. React to every headline and you overpay for risk. The hard part is telling the two apart while it is happening, not three months later when the data arrive.

Forecasters have habits too. One small chart in the report shows that since 2023, the WEO has underestimated world growth for three years running, after years of overestimating it after 2008. Having been caught out by a string of shocks since 2020, they may now be too cautious. For market participants, the point is simple. Consensus forecasts carry their own biases, and those who lean on them pick up the same biases.

Then there is the calm. Markets have stayed steady through a war, an energy shock, trade disputes and worries about government debt. The IMF offers three possible reasons: exuberance around artificial intelligence, markets' limited ability to price rare geopolitical events, and a belief that policy support will cushion any bad outcome. All three are about behaviour. Crowding into AI stocks, a blind spot for rare events, and a quiet faith that someone will step in. The IMF's stress scenario shows what happens if that faith is tested: US stocks fall 20%, emerging-market borrowing costs jump by 75 to 100 basis points, and world output ends up 1.1% lower by 2028.

The chapter on cost-of-living crises reads almost like a behavioural study. Households do not watch the inflation index. They watch the price of vegetables, cooking gas and petrol, and when those jump, their expectations jump with them. In emerging markets, the IMF finds that one-year inflation expectations stay about 5.3% higher a year into such a crisis, and five-year expectations are still about 1.1% higher three years later. People remember price shocks for a long time.

Governments feel the same pressure. When prices at the fuel pump and in the market are rising, being seen to act matters, so they reach for subsidies, tax cuts and price caps. The IMF estimates that protecting poor households this way costs 3 to 22 times more than targeted cash support. And when many countries subsidise at once, world prices rise further and the poorest end up paying again.

For Indian fixed income, none of this is theory. The RBI raised the repo rate by 25 basis points to 5.50% on October 7 and moved to a stance of calibrated tightening. The 10-year government bond yield touched about 7.4%, its highest in over three years, with Brent above $100, already higher than the IMF's assumed average of about $96 for the year. The IMF puts inflation above target in the group where a bias towards tightening is justified. Yet India is the only large energy-importing emerging market whose longer-term growth outlook the IMF has raised. Strong growth, rising inflation and a global market still betting the oil shock is temporary: that is exactly the mix in which people make mistakes.

The easy course for market participants is to anchor on the IMF baseline, react to every move in US yields or crude, or follow the crowd on duration. The harder course is the one the IMF sets for central banks: each time oil or Treasury yields move, ask whether the move reflects fear or a real shortage, and ask whether one's own view comes from the evidence or from the last crisis remembered.

The forecasts will change, as they always do. The way people react to them changes much less. That may tell us as much about where markets are headed as the forecasts themselves.

*The views are personal and are not those of the employers.