Tighter monetary policy and delayed unwinding of supply and demand dislocations have lowered core goods inflation, particularly for durable goods like motor vehicles.

The pandemic has led to a decrease in vehicle supply and increased interest rates, resulting in a significant drop in inflation.

Core goods prices have declined in the past two months, but 12-month inflation remains substantially over pre-pandemic levels.

To sustain progress, restrictive monetary policy is needed.

Housing services inflation, which makes up over half of the core PCE index, has stalled since liftoff but has fallen in three- and six-month periods.

Nonhousing services, which make up over half of the core PCE index, have seen modest inflation decline due to labor-intensive services and tight labor markets.

Over time, restrictive monetary policy will balance aggregate supply and demand, lowering inflation in these vital sectors.