The International Monetary Fund said Tuesday that global inflation is expected to come down more slowly in the second half of the year, raising the prospect of interest rates remaining "higher-for-even- longer."

The reason: the price of services. That broad category ranges from housing and haircuts to restaurants and medical treatment.

"Services price inflation is holding up progress on disinflation, which is complicating monetary policy normalization," according to a new IMF report released Tuesday. "Upside risks to inflation have thus increased, raising the prospect of higher-for-even-longer interest rates."

Major global central banks are still expected to lower interest rates in the second half of this year, though the pace of cutting will vary based on the path of inflation in different countries.

In the US, traders expect the Federal Reserve to begin cutting in September.

Read more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards

Fed Chair Jerome Powell gave another signal Monday that the central bank is nearing the time when it can start easing monetary policy, citing a recent turnaround in inflation readings following hotter-than-expected data in the first quarter.

But he declined to offer a specific timetable, saying, "We are going to make these decisions meeting by meeting and the evolving data and the balance of risks."

The IMF's report warned that an escalation in trade tensions could raise near-term risks to inflation by increasing the cost of imported goods along the supply chain.

The IMF also said trade tariffs could generate damaging cross‐border spillovers, as well as trigger retaliation, resulting in a costly race to the bottom.

In countries where upside risks to inflation have materialized, the IMF recommends central banks should refrain from easing too early and remain open to further tightening should it become necessary.

Where data encourages a durable return to inflation targets, central banks should cut rates gradually, it said.

Economic growth

The IMF's outlook for global growth remained unchanged from its last report in April, projecting growth of 3.2% in 2024 and 3.3% in 2025.

Growth in the US was revised down by a tenth of a percent for this year, to 2.6%. Growth is expected to slow to 1.9% in 2025 as the job market cools and consumer spending moderates, with fiscal policy starting to tighten gradually.

In the eurozone, an economic slowdown appears to have bottomed. The IMF lifted its forecast for the euro area this year by a tenth of a percent to 0.9%, driven by stronger momentum in services in the first half of the year. Growth is projected to rise to 1.5% in 2025.

China is expected to power growth in emerging markets this year. The IMF is forecasting growth of 5%, driven by a rebound in consumer spending and strong exports in the first quarter.

But next year, growth in China is projected to slow to 4.5% and to continue to decelerate over the medium term to 3.3% by 2029 because of headwinds from aging and slowing productivity growth.

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