after the pandemic recession which was exacerbated by russia ’ s invasion of ukraine. turning to the 3 - month change ( the right panel ) energy prices have been declining sharply recently and we expect them to continue to decline this year, reflecting the path of crude oil futures prices and the expectation that unusually elevated gasoline margins will, on average, decline over the remainder of this year. so, what do i take away from all this? i think there are practical implications for getting a clear picture of the economy and setting appropriate monetary policy, and also a reminder for me about the trust i bear as a public official. most practically, if i had focused on core inflation over the last two years and tended to look past increases for food and energy, and especially for housing, i would have missed an alarming increase in inflation, and reacted more slowly than my federal reserve colleagues and i appropriately did to start bringing down inflation. the federal open market committee raised interest rates more quickly than it had in more than forty years, and i think the progress we have made on inflation shows how important it was to act so urgently. just as importantly, excluding those prices would have neglected how much hardship this high inflation has been for many people, especially lower - income individuals and families. high inflation is a very different experience when you are effectively paying a higher rate than others, when a higher share of your expenses and income are spent on necessities, and when you have little in savings to draw on, as lower - income people do. when i talk about how important it is to win this inflation fight, it is partly in recognition of this inescapable reality for many millions of people. - 11 fortunately, there are signs that food, energy, and shelter prices will moderate this year. an important factor has been the federal reserve ’ s ongoing fight to lower inflation through tighter monetary policy. we are seeing that effort begin to pay off, but we have farther to go. and, it might be a long fight, with interest rates higher for longer than some are currently expecting. but i will not hesitate to do what is needed to get my job done. the inflation rate for necessities : a look at food, energy, and shelter inflation christopher j. waller member board of governors of the federal reserve system remarks at the 2023 agribusiness conference arkansas state university february 8, 2023 the views expressed here are my own and do not reflect those of the board of governors

unusual configurations of asset price movements is higher than normal. implications for risk management financial institutions and public policymakers have demonstrated an ability to respond flexibly to changing circumstances over the past several years. but what does this imply about their ability to adapt to the conditions that they may confront in the future? financial institutions one of the defining characteristics of financial institutions and markets of late has been a significant expansion in the tools available for managing risk. these tools are tested and refined over time. importantly, however, they rest on past experience and our understanding of events. thus, as firms look ahead, they must be cognizant of the challenges that activities or events outside our experience pose for their risk management. new products and new business lines, for example, are an ongoing challenge. historical data may be limited or not relevant for assessing risk in newly created products. such data limitations affect even standard risk - management tools such as value - at - risk analysis. recognizing the need to supplement standard risk - management tools, managers also routinely estimate their exposures under so - called tail events. tail events, that is, asset price movements that are much more extreme than our usual experience, often appear driven by unique and idiosyncratic circumstances, so their implications are open to question and a challenge to risk managers. should they be viewed as temporary deviations from a still - valid view of the usual distributions of possible outcomes, or are they a harbinger of a more permanent shift that suggests a need for re - assessment of risk - management models and practices? tail events, by their nature, also are likely to be accompanied by heightened uncertainties. during such periods, the reaction of other market participants may become more relevant in the assessment of one ’ s own risk. consider the management of market liquidity risk when asset prices are moving in unusual ways. a firm can no longer assume that it will be able to reduce its risk quickly by adjusting positions. trades may be possible mostly at smaller volumes, and large trades almost surely will have greater price effects than normally observed. other firms also may be trying to liquidate the same positions, creating further demands on diminished market liquidity. risk management must take into account the potential for the longer holding periods and more - severe asset price movements likely to be observed in such conditions and the possibility of concentrations of positions in some markets. the challenges posed by tail events are not limited to market liquidity risk. they have broader effects on the measurement and management of market and counterpart