##t in earlier decades. economic policymaking could not, and should not, remain unaltered in the face of major changes in the speed of economic processes. fortunately, the very advances in technology that have quickened economic adjustments have also enhanced our capacity for real - time surveillance. as i pointed out earlier, demand has been depressed by the rise in energy prices as well as by the needed slowing in the pace of accumulation of business capital and consumer durable assets. the sharp rise in energy costs pressed down on profit margins still further in the fourth quarter. about a quarter of the rise in total unit costs of nonfinancial, nonenergy corporations reflected a rise in energy costs. the 12 percent rise in natural gas prices last quarter contributed directly, and indirectly through its effects on the cost of electrical power generation, about one - fourth of the rise in overall energy costs for nonfinancial, non - energy corporations ; increases in oil prices accounted for the remainder. in addition, a significant part of the margin squeeze not directly attributable to higher energy costs probably has reflected the effects of the moderation in consumer outlays that, in turn, has been due in part to higher costs of energy, especially for natural gas. hence, it is likely that energy cost increases contributed significantly more to the deteriorating profitability of nonfinancial, non - energy corporations in the fourth quarter than is suggested by the energy - related rise in total unit costs alone. to be sure, the higher energy expenses of households and most businesses represent a transfer of income to producers of energy. but the capital investment of domestic energy producers, and, very likely, consumption by their owners, have provided only a small offset to the constraining effects of higher energy costs on spending by most americans. moreover, a significant part of the extra expense is sent overseas to foreign energy producers, whose demand for exports from the united states is unlikely to rise enough to compensate for the reduction in domestic spending, especially in the shortrun. thus, given the evident inability of energy users, constrained by intense competition for their own products, to pass on much of their cost increases, the effects of the rise in energy costs does not appear to have had broad inflationary effects, in contrast to some previous episodes when inflation expectations were not as well anchored. rather, the most prominent effects have been to depress aggregate demand. the recent decline in energy prices and further declines anticipated by futures markets, should they occur, would tend

repurchase agreements some additional assets that the federal reserve act already authorizes the federal reserve to purchase. in particular, the fomc asked the staff to explore the possible mechanisms for backing our usual repurchase operations with the collateral of certain debt obligations of u. s. states and foreign governments. we will also be consulting with the congress on these possible steps before the fomc further considers such transactions. taking such assets in repurchase operations would significantly expand and diversify the assets our counterparties could post in temporary open market operations, reducing the potential for any impact on the pricing of private sector instruments. finally, the fomc decided to study further the even longer - term issue of whether it will ultimately be necessary to expand the use of the discount window or to request the congress for a broadening of its statutory authority for acquiring assets via open market operations. how quickly the fomc will need to address these longer - run portfolio choices will depend on how quickly the supply of treasury securities declines as well as the usefulness of the alternative assets already authorized by law. in summary, although a reduced availability of treasury securities will require adjustments in the particular form of our open market operations, there is no reason to believe that we will be unable to implement policy as required.