, soundness, and financial stability. tiered regulatory and supervisory experience the federal reserve also takes a tiered approach to supervision. we organize the firms we supervise into portfolios based predominately, although not exclusively, on asset size. we have four such groups : ( 1 ) community banking organizations, which are generally those with $ 10 billion or less in total assets ; ( 2 ) regional banking organizations, which have total assets between $ 10 billion and $ 50 billion ; ( 3 ) large banking organizations, which have total assets over $ 50 billion but are not among the largest and most complex banking organizations ; and ( 4 ) firms overseen by the large institution supervision coordinating committee ( liscc ), which are the largest and most complex banking organizations. 1 as with tiered regulation, our tiered supervision is intended to take into account differences in business models, risks, relative regulatory burdens, and other salient considerations. where specific regulatory goals for the different portfolios vary, the supervisory programs reflect those differences. and even where the goals are similar across portfolios, supervisory programs should nevertheless take account of the differences among the firms in the four portfolios. in general, we shape our supervisory expectations for each portfolio by considering the increase in safety and soundness that we are likely to achieve through a specific practice or requirement, in light of the regulatory costs for the banking organizations in the portfolio and the impact that the stress or failure of those institutions would likely have on credit intermediation, the deposit insurance fund, and financial stability. so, for example, there are heightened expectations with regard to corporate governance for large banking organizations that are not applied to regional or community banking organizations. among other areas, the federal reserve expects the boards of directors of these larger firms to set direction and oversight for revenue and profit generation, risk management, and control functions ; to ensure that senior management has the expertise and level of involvement required to manage core business lines, critical operations, banking offices, and other material entities ; and to maintain a corporate culture that emphasizes the importance of compliance with laws, regulation, and consumer protection. while strong corporate governance is important at all banking organizations, it is vital at large banking organizations, given that their systems and operations are typically much broader and more for more information supervision. htm. on the liscc, see http : / / federalreserve. gov / bankinforeg / large - institution - bis central bankers ’ speeches complex than those of the smaller

one of sustained economic growth and contained inflation pressures. in our view, realizing this outcome will require the federal reserve to continue to remove monetary accommodation. this generally favorable outlook, however, is attended by some significant uncertainties that warrant careful scrutiny. with regard to the outlook for inflation, future price performance will be influenced importantly by the trend in unit labor costs, or its equivalent, the ratio of hourly labor compensation to output per hour. over most of the past several years, the behavior of unit labor costs has been quite subdued. but those costs have turned up of late, and whether the favorable trends of the past few years will be maintained is unclear. hourly labor compensation as measured from the national income and product accounts increased sharply near the end of 2004. however, that measure appears to have been boosted significantly by temporary factors. other broad measures suggest that hourly labor compensation continues to rise at a moderate rate. the evolution of unit labor costs will also reflect the growth of output per hour. over the past decade, the u. s. economy has benefited from a remarkable acceleration of productivity : strong gains in efficiency have buoyed real incomes and restrained inflation. but experience suggests that such rapid advances are unlikely to be maintained in an economy that has reached the cutting edge of technology. over the past two years, growth in output per hour seems to have moved off the peak that it reached in 2003. however, the cause, extent, and duration of that slowdown are not yet clear. the traditional measure of the growth in output per hour, which is based on output as measured from the product side of the national accounts, has slowed sharply in recent quarters. but a conceptually equivalent measure that uses output measured from the income side has slowed far less. given the divergence between these two readings, a reasonably accurate determination of the extent of the recent slowing in productivity growth and its parsing into cyclical and secular influences will require the accumulation of more evidence. energy prices represent a second major uncertainty in the economic outlook. a further rise could cut materially into private spending and thus damp the rate of economic expansion. in recent weeks, spot prices for crude oil and natural gas have been both high and volatile. prices for far - future delivery of oil and gas have risen even more markedly than spot prices over the past year. apparently, market participants now see little prospect of appreciable relief from elevated energy prices for years to come. global demand for energy apparently is expected to remain strong, and market participants