Evidence shows that markups in the services sector are higher, on average, than in the manufacturing sector, partly reflecting reduced exposure to foreign competition.23 Although the share of services in total global trade has increased somewhat since 1970, they still only account for around a fifth of total global exports today.24 Lower competition may allow services firms to adjust their prices less frequently.
The implication is that the rise of the services sector has measurably lowered the median frequency of price changes in the economy and, therefore, the response of inflation to changes in demand and monetary policy in the short term, as you can see on the left-hand side of my slide.