Fitch expects global services inflation to remain 'sticky,' slowing pace of rate cuts

Fitch expects global services inflation to remain 'sticky,' slowing pace of rate cuts

Services industries more labor-intensive than goods sector, says rating agency

By Ovunc Kutlu

ISTANBUL (AA) - Fitch Ratings said Wednesday that it expects global services inflation to remain "sticky" and slow the pace of interest rate cuts around the world.

"Inflation has slowed rapidly, helped by a reversal of food and energy price inflation," the rating agency said in a statement. "Global inflation rates are falling, but their descent is being hampered by stubborn services sector price growth."

Although core goods inflation, which excludes food and energy prices, has also fallen in many countries, services inflation needs to fall further, it added.

"Services industries are more labor-intensive than the goods sector, and tight labor markets and high wage inflation are having a bigger impact," said the statement.

"Productivity-adjusted wages, or unit labor costs, in the services sector are still growing at well above pre-pandemic rates in the US and Europe," it added.

Fitch noted that housing costs are also contributing to high services inflation, particularly in developed economies.

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