Services Inflation 2025 , The Sticky Side of Global Prices

Why Services Matter

While goods prices have eased worldwide, services inflation—covering rent, transport, health, hospitality, and education—remains stubbornly high.
Services are labor-intensive and slow to respond to monetary policy, making them the last mile of global disinflation.

Figure 1.6 (4) — Services Inflation Trends (2019 – 2025)

Key Regions:

• United States (blue)

• Euro Area (red)

• Other Advanced Economies (gold)

• China (green)

• Other Emerging and Developing Economies (EMDEs) – blue-shaded band

Global Patterns and Persistence

1. Gradual Rise (2020 – 2022):
As pandemic restrictions lifted, global demand for travel, housing, and leisure surged. Tight labor markets lifted wages, pushing up prices in core services sectors.

2. Sticky Plateau (2023 – 2025):
Unlike goods inflation, services inflation declined only slowly.

• U.S. and Euro Area hover around 3–4 %.

• Other AEs mirror similar patterns as wage negotiations catch up with living costs.

• China remains below 1 %, reflecting weaker consumption.

• EMDEs show the widest variability (3–9 %), dominated by transport and education costs.

Services inflation has replaced food and energy as the main obstacle to achieving 2 % inflation targets.

Why Services Inflation Is So Sticky

Central banks face a slow transmission of rate hikes to service prices because of multi-year contracts and labor agreements.

Regional Reflections — Africa and Kenya

• Kenya’s services inflation averages ≈ 4 %, driven by transport and housing.

• Public transport fare adjustments and energy pass-through effects mirror global pressures.

• Growing demand for private education and healthcare adds to non-tradable inflation.

• CBK’s 9.25 % policy rate anchors expectations but cannot fully offset domestic structural drivers.

Service-sector inflation demonstrates why macroeconomic stability depends on supply-side policy — urban housing, skills development, and productivity reforms.

For DatalytIQs Academy Learners

• Recreate this chart using Python’s fill_between() for the EMDE band.

• Compare core goods vs services inflation to illustrate post-pandemic divergence.

• Conduct a correlation analysis between Kenya’s services inflation and global indices.

• Simulate policy scenarios showing how interest rates affect service prices over 12–18 months.

Data and Acknowledgment

Source: IMF World Economic Outlook (October 2025) – Figure 1.6 (4) “Services Inflation.”
Acknowledgment: Haver Analytics and IMF staff for data and visual insights.
Author: Collins Odhiambo Owino, DatalytIQs Academ