Logistically Speaking - Hot Sheet Week 10

Inflation May Linger Due to Services

The Bank for International Settlements (BIS) suggests that inflation may persist despite a global economic slowdown, with services becoming the dominant driver. Unlike goods, services are less sensitive to energy costs, making them more resistant to lower commodity prices. Additionally, the higher labor intensity of services makes their inflation more persistent. The BIS warns that the larger contribution of services to inflation could maintain underlying inflationary pressures, requiring central banks to keep monetary policy tighter. The shift in inflation sources from supply bottlenecks to services, exacerbated by the pandemic, poses challenges for central banks in deciding when to lower interest rates without reigniting consumer-price pressures. (Source: Alexander Weber)