Goods inflation can cool fast. Services inflation usually cools slow.

That gap is a big reason inflation can look “fixed” in one report, while the cost of daily life still climbs. In the U.S., prices for things you buy in a store can drop when demand weakens or supply improves. Prices for services tend to keep rising because they are tied to wages and shelter. Those move in slow steps.

This matters for policy. The Federal Reserve watches the parts of inflation that last. When services stay hot, policy can stay tight longer than markets expect. Not because the Fed wants to be stubborn, but because the data keeps pointing to the same slow-moving sources.

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Goods are easier to discount.

If a retailer has too much inventory, it can cut prices this week. If shipping improves, costs can drop fast. If consumers pull back, sellers often respond right away. Goods markets clear quickly because products can be stored, shipped, and priced day by day.

You can see this in recent history. In 2021 and early 2022, goods inflation rose as supply chains struggled and demand for “stuff” surged. By late 2022 and into 2023, many goods prices cooled as supply improved and spending shifted. That swing was sharp because the goods side of the economy can change fast.

Services are not like goods. You cannot warehouse a dentist visit.

Many services businesses are built around payroll. Wages are the main cost. When wages rise, service prices often follow. But wage growth does not slow quickly. Employers change hiring plans slowly. Workers do not accept lower pay overnight. So the pressure lasts.

Shelter is the second anchor. Rents and housing costs reset over time, not all at once. Even when new leases cool, many people are still on leases signed months earlier. Also, common inflation measures for shelter tend to reflect changes with a delay. That means shelter inflation can keep showing up in the data even after the housing market has started to ease.

Wages and shelter make services inflation sticky. It does not collapse. It fades in stages.

The U.S. has seen this before.

From 1973 to 1975, and again from 1979 to 1981, inflation surged. Energy shocks were part of the story. But the larger problem was how inflation spread into wages and services. Once pay raises and rent increases became routine, inflation became harder to push down. Goods prices could bounce around, but services inflation kept pressure on the system.

That period left a lasting lesson. When inflation gets into wages and shelter, it tends to stay longer than people expect. Even when the first shock fades, the second wave can keep moving.

The next key anchor is 1982 to 1984.

After the Fed tightened sharply in the early 1980s, inflation began to fall. But it did not fall evenly. Goods inflation cooled faster than services inflation. Services still carried the memory of earlier wage gains and higher rents.

Over time, the U.S. entered a long disinflation era. Global trade expanded. Productivity improved in some goods industries. Prices for many manufactured items became more stable. Services, however, often stayed higher than goods. That split is normal. The problem is when services is not just higher, but high enough to keep overall inflation above target.

The most recent example is 2021 to 2024.

In the first phase, goods inflation ran hot. Supply shortages, shipping problems, and strong demand pushed prices up. Then goods inflation cooled as supply normalized. Many people took that as the sign inflation was ending.

But services inflation did not behave the same way. Wages were rising in a tight labor market. Shelter costs were still filtering through. Even when the economy cooled, services often stayed firm. That is the sticky services phase.

This is also why markets and the Fed can sound like they are reading different stories. Markets often react to the fastest-changing lines. The Fed focuses on the lines that tend to last.

Today’s debate is often about timing.

If goods inflation is calm, it is easy to think the job is done. But services inflation is the last mile. It depends on slower forces. Wage growth needs to cool. Shelter inflation needs time to roll over in broad measures. Those shifts do not happen in a single month.

This creates a pattern that shows up in many cycles:

When services is sticky, it can keep interest rates higher for longer. It can also keep financial conditions tight even if some prices are falling.

Sticky services inflation narrows the range of easy outcomes.

It does not guarantee a recession. It does mean the path back to low inflation is usually slower. The economy has to cool enough for wage growth to slow. Housing and rents have to soften enough for shelter inflation to stop adding pressure. Both processes take time.

That is why this phase can feel confusing. The headlines may say inflation is down, and that can be true in one sense. But if services keeps rising, inflation is still moving through the system. It is not gone. It is unwinding.

Goods can forget fast. Services remember.

Prices for products can adjust quickly because sellers can change tags and clear inventory. Services prices are tied to paychecks and leases. Those reset slowly. That is why goods inflation can cool in months, while services inflation can take much longer.

The moment may feel unique. But the sequence is familiar. We have seen versions of it in 1979–1981, in 1982–1984, and again in 2021–2024. The last mile is usually the slow mile.