of services, such as health care, food services, transportation, and accommodations. twelve - month inflation in this sector has moved sideways since liftoff. inflation measured over the past three and six months has declined, however, which is encouraging. part of the reason for the modest decline of nonhousing services inflation so far is that many of these services were less affected by the normalization of dislocations due to the pandemic is likely playing a role here as well. for example, the shifts in housing preferences related to working from home likely contributed to the increase in housing demand reflected in the sizable earlier increases in rents. as the price effects of that demand shift played out, the growth rate of rents would naturally decline toward its earlier trend. finally, multifamily construction is quite high by historical standards, and that supply coming on line has likely also taken some pressure off market rents. pce prices for housing services include both the rents paid by tenants and an imputed rental value for owner - occupied dwellings ( measured as the income the homeowner could have received if the house had been rented to a tenant ). for additional details, see bureau of economic analysis ( 2022 ), “ rental income of persons, ” in nipa handbook : concepts and methods of the u. s. national income and product accounts ( washington : bea, december ), pp. 12 - 1 – 12 - 15, https : / / www. bea. gov / resources / methodologies / nipa - handbook / pdf / chapter - 12. pdf. - 5global supply chain bottlenecks and are generally thought to be less interest sensitive than other sectors such as housing or durable goods. production of these services is also relatively labor intensive, and the labor market remains tight. given the size of this sector, some further progress here will be essential to restoring price stability. over time, restrictive monetary policy will help bring aggregate supply and demand back into better balance, reducing inflationary pressures in this key sector. the outlook turning to the outlook, although further unwinding of pandemic - related distortions should continue to put some downward pressure on inflation, restrictive monetary policy will likely play an increasingly important role. getting inflation sustainably back down to 2 percent is expected to require a period of below - trend economic growth as well as some softening in labor market conditions. economic growth restrictive monetary policy has tightened financial conditions, supporting the expectation of below - trend growth. 5 since

new displaces the old. as the 1980s progressed, the success of that strategy confirmed the earlier views that a loosening of regulatory restraint on business would improve the flexibility of our economy. no specific program encompassed and coordinated initiatives to enhance flexibility, but there was a growing recognition that a market economy could best withstand and recover from shocks when provided maximum flexibility. beyond deregulation, innovative technologies, especially information technologies, have contributed critically to enhanced flexibility. a quarter - century ago, for example, companies often required weeks to discover the emergence of inventory imbalances, allowing production to continue to exacerbate the excess. excessive stockbuilding, in turn, necessitated a deeper decline in output than would have been necessary had the knowledge of the status of inventories been fully current. the advent of innovative information technologies significantly shortened the reporting lag, enabling flexible real - time responses to emerging imbalances. deregulation and the newer information technologies have joined, in the united states and elsewhere, to advance flexibility in the financial sector. financial stability may turn out to have been the most important contributor to the evident significant gains in economic stability over the past two decades. historically, banks have been at the forefront of financial intermediation, in part because their ability to leverage offers an efficient source of funding. but in periods of severe financial stress, such leverage too often brought down banking institutions and, in some cases, precipitated financial crises that led to recession or worse. but recent regulatory reform, coupled with innovative technologies, has stimulated the development of financial products, such as asset - backed securities, collateral loan obligations, and credit default swaps, that facilitate the dispersion of risk. conceptual advances in pricing options and other complex financial products, along with improvements in computer and telecommunications technologies, have significantly lowered the costs of, and expanded the opportunities for, hedging risks that were not readily deflected in earlier decades. the new instruments of risk dispersal have enabled the largest and most sophisticated banks, in their credit - granting role, to divest themselves of much credit risk by passing it to institutions with far less leverage. insurance companies, especially those in reinsurance, pension funds, and hedge funds continue to be willing, at a price, to supply credit protection. 2 / 5 these increasingly complex financial instruments have contributed to the development of a far more flexible, efficient, and hence resilient financial system than the one that existed just a quarter - century ago. after the