and most interconnected banks. while there is less visibility into nonbank financial institutions, this tightening cycle has seen markets absorb a number of risk events, suggesting that leverage does not appear too great. a subset of banks has a high concentration of commercial real estate ( cre ) loans, and supervisors are working closely with those banks. as the cre market adapts to the shifting preference for downtown office space, prices for some buildings will likely continue to fall, and more loans will need to be worked out as they come due. however, markets have broadly taken the bumps in stride so far, without notable spillovers. in sum, i see a system that has some vulnerabilities but also important sources of resilience and, on balance, is not currently positioned to unusually amplify any future shock. a stable and resilient financial system is critical to the well - being of households and firms, allowing them to access credit, and it is essential for the federal reserve to achieve its dual mandate of maximum employment and price stability. thank you. it is a pleasure to be back at the economic club of new york. i look forward to continuing our conversation. 1 the views expressed here are my own and not necessarily those of my colleagues on the federal open market committee. 5 / 5 bis - central bankers'speeches

supplies recovered from the shock of russia's february 2022 invasion of ukraine. when excluding often - volatile food and energy costs, 12 - month inflation in core goods prices is down from 7. 6 percent in early 2022, returning to the trend of slightly negative inflation observed before the pandemic. the increased availability of computer chips and other material inputs led to a recovery in motor vehicle production and, along with restraint in aggregate demand, likely reduced supply – demand imbalances for durable goods, more generally. inflation in services, a spending category that accounts for about two - thirds of household budgets, has slowed significantly, though it remains noticeably above pre - 1 / 5 bis - central bankers'speeches pandemic rates. specifically, housing services inflation has eased quite gradually, as it takes time for the moderation of increases in market rent - what a landlord charges a new tenant - to show through to broader measures of shelter costs. one possible explanation is that landlords raise rents for existing tenants only gradually over several years and are still moving those rents closer to the market rate. outside of housing, 12 - month services inflation slowed over the course of last year from above 5 percent to below 3. 5 percent but has stalled near that rate this year. that is still about 1 percentage point above the average pace during the two years before the pandemic. some of the largest contributors to recent services inflation are imputed prices, including portfolio management fees that are affected by equity price increases. other components of services inflation that are more reflective of supply and demand conditions in the economy have continued to ease. prices of hotel stays, airline tickets, and restaurant meals are illustrative. i expect that the longer - run disinflation trend will continue as interest rates weigh on demand. anecdotal reports, including from the fed's beige book, suggest consumers are pushing back on price increases. several national retailers have announced plans to lower prices on certain items, and there is increasing evidence that higher - income shoppers are trading down to discount stores. two other important factors supporting this trend are well - anchored long - term inflation expectations and short - term inflation expectations falling back to near pre - pandemic levels. my forecast is that three - and six - month inflation rates will continue to move lower on a bumpy path, as consumers'resistance to price increases is reflected in the inflation data. i expect 12 - month inflation will roughly move sideways for the rest of this year,