Analysts at Capital Economics suggest that the ongoing reduction in international visitors to the U.S.—still around 15% below pre-pandemic numbers—may be subtly easing inflationary pressures.

Fewer foreign tourists mean less spending in key service areas such as hotels, restaurants, and entertainment venues, which traditionally rely heavily on international guests. As a result, inflation in U.S. travel-related services has slowed more sharply than in many other developed countries, partly due to this weaker rebound in inbound tourism.

Before COVID-19, nearly one-third of U.S. travel service exports were driven by international visitors. Experts now describe this drop in foreign demand as a “hidden advantage” for the Federal Reserve, which has struggled to bring inflation down to its 2% goal.

Inflation in the service sector remains tough to control, driven by robust domestic demand and rising wages. While the decline in tourism impacts certain industries, the overall effect on the economy’s growth is relatively small. Employment in tourism-related fields has largely bounced back, and domestic travel continues at a healthy pace.

Capital Economics notes that if international tourism had fully recovered by now, inflation might be slightly higher. However, as global travel gradually returns to normal, increased foreign arrivals could again put upward pressure on prices.

For the moment, the persistent shortfall in foreign tourists is providing U.S. policymakers with a modest but valuable buffer in their efforts to control inflation.