KC Fed Finds Interest Rates Don’t Affect Service Sector’s Influence on Inflation

The Kansas City Federal Reserve recently released a study stating that interest rates do not significantly impact the service sector’s influence on inflation. As a journalist, I have to say; this is not surprising news.

The Service Sector Dominates

Anyone paying attention to the economy knows that the service sector has been dominating for years. Most jobs in the United States are in the service sector, accounting for a significant portion of the country’s GDP.

The service sector encompasses various industries, from healthcare to hospitality to financial services. It is less affected by interest rates than other sectors because the cost of borrowing money is not as significant. Therefore, it makes perfect sense that interest rates would not significantly impact the service sector’s influence on inflation.

Rising Wages are the Real Driver

What is driving inflation in the service sector right now is rising wages. As the job market tightens and worker competition increases, employers must pay more to attract and retain talent. This upward pressure on wages is being felt across the service sector, driving up prices.

Of course, rising wages are not the only factor driving up prices in the service sector. Other factors are at play, such as rising healthcare costs and increased demand for certain services. However, the impact of these factors is much more significant than the impact of interest rates.

Related Facts

• The service sector accounts for around 80% of US jobs
• The service sector makes up about 70% of the US GDP
• The average hourly wage for non-supervisory employees in the service sector was $15.12 in July 2021
• The healthcare, education, and hospitality sectors are experiencing the most significant wage increases
• Inflation in the service sector has been steadily rising over the past year

Key Takeaway

The Kansas City Fed’s study confirms what many have already suspected: interest rates do not significantly impact the service sector’s influence on inflation. Instead, rising wages and other factors are driving up prices in this dominant sector of the US economy.

Conclusion

As a journalist, I feel reporting the news accurately and honestly is essential. Therefore, the fact that interest rates do not significantly impact the service sector’s influence on inflation is not surprising to me or anyone else paying attention to the economy. However, it is still valuable information to have, and it confirms what we already knew: the service sector is a driving force in the US economy, and rising wages significantly impact inflation.