case in the united states, investor sentiment and the functioning of financial markets abroad have improved somewhat. as economic activity weakened during the second half of 2008 and prices of energy and other commodities began to fall rapidly, inflationary pressures diminished appreciably. weakness in demand and reduced cost pressures have continued to keep inflation low so far this year. although energy prices have recently risen some, the personal consumption expenditure ( pce ) price index for energy goods and services in march remained more than 20 percent below its level a year earlier. food price inflation has also continued to slow, as the moderation in crop and livestock prices has been passing through to the retail level. core pce inflation ( prices excluding food and energy ) dropped below an annual rate of 1 percent in the final quarter of 2008, when retailers and auto dealers marked down their prices significantly. in the first quarter of this year, core consumer price inflation moved back up, but to a still - low annual rate of 1. 5 percent. the economic outlook we continue to expect economic activity to bottom out, then to turn up later this year. key elements of this forecast are our assessments that the housing market is beginning to stabilize and that the sharp inventory liquidation that has been in progress will slow over the next few quarters. final demand should also be supported by fiscal and monetary stimulus. an important caveat is that our forecast assumes continuing gradual repair of the financial system ; a relapse in financial conditions would be a significant drag on economic activity and could cause the incipient recovery to stall. i will provide a brief update on financial markets in a moment. board of governors of the federal reserve system ( 2009 ), the april 2009 senior loan officer opinion survey on bank lending practices ( washington : board of governors, may 4 ). board of governors of the federal reserve system ( 2009 ), " federal reserve announces expansion of eligible collateral under term asset - backed securities loan facility ( talf ), " press release, may 1. even after a recovery gets under way, the rate of growth of real economic activity is likely to remain below its longer - run potential for a while, implying that the current slack in resource utilization will increase further. we expect that the recovery will only gradually gain momentum and that economic slack will diminish slowly. in particular, businesses are likely to be cautious about hiring, implying that the unemployment rate could remain high for a time, even after economic growth resumes. in this environment, we anticipate that

that " in advance " part ). supervision should not be adjusted in specific situations to displace or alter regulations, or without appropriate notice and opportunity for public comment, and should be accompanied by clear communication with regulated firms. where we have established precedents, we should respect them. banks rely on our precedents in making their business decisions, so not respecting precedents can interfere with the ability of firms to plan and to fairly compete. if changes to precedents are appropriate, we should explain those intentions and employ a transparent and accountable administrative process to ensure fairness and appropriately implement the change. take, for example, the supervision criteria implemented by the large institution supervision coordinating committee ( the liscc manual ). currently, these materials are not public. making these materials public would not only improve transparency, doing so would also provide some assurance to the banks subject to them that they are being held to the same supervisory expectations as their peers over time. without this clarity, it is far more challenging to build trust in this aspect of the supervisory process. improving transparency around supervisory standards promotes safety and soundness, both encouraging compliance, and limiting the role of formal and informal enforcement actions and penalties in addressing serious issues. in my view, success should not be measured by penalties or enforcement, but by how well banks are following the rules. the principles i've articulated today reflect my approach to considering whether and how the regulation and supervision of the largest banks should evolve in response to changing economic and financial conditions. the regulation and supervision of financial institutions must be nimble to address new risks to safety and soundness and financial stability, but should always consider tradeoffs and potential unintended consequences, like increasing the cost of lending or pushing financial activities outside of the regulatory perimeter into the shadow banking system. i look forward to working with vice chair 7 / 8 bis - central bankers'speeches barr, my fellow board members, and colleagues at the other bank regulatory agencies, as we consider the evolution of supervision and regulation for the largest financial institutions. 1 see michelle bowman, " my perspective on bank regulation and supervision " ( speech at the conference for community bankers sponsored by the american bankers association, february 16, 2021 ). 2 see 12 u. s. c. § § 1828 ( c ) ( 5 ), ( 11 ) ; 1842 ( c ). 3 see michelle w. bowman, " the new landscape for banking competition " ( speech at the 2022 community banking research conference, st. louis, mo,