<h3>INTRODUCTION</h3>
<p>Despite global and pandemic-related economic headwinds, the U.S. economy proved its resilience in the fourth quarter of 2022 with real gross domestic product (GDP) growing at a healthy 2.9 percent annualized rate. Labor markets remained tight: employers added an average of 247,000 payroll jobs each month—a pace well-above that needed to maintain a stable unemployment rate—and the unemployment rate returned to the half-century low of 3.5 percent. Moreover, inflation continued to slow: since peaking in June 2022, 12-month headline inflation (as measured by the consumer price index) has fallen by 2.6 percentage points, owing to sharp drops in energy prices and moderating non-energy goods inflation over the second half of the year. Core inflation (excluding food and energy) slowed by less than headline, largely due to elevated shelter inflation—though timely measures of house prices and rents suggest a reprieve in the coming year. Housing markets showed considerable weakening, correcting from pandemic-related imbalances and responding to tighter monetary policy.</p>