, our supervisors will be able to monitor more effectively how firms are performing relative to their projected baselines. this, in turn, will enable us to require resubmissions of capital plans in a more timely way, should conditions change materially at an individual firm or more broadly in the industry. one issue that we will be considering at some length is the nature of communications between supervisors and firms during the duration of the stress test and ccar. some of the practical concerns about communication can be fairly easily addressed, such as by continuing to improve the timeliness of answering technical questions and generally having more coordinated communication with the firms throughout the process. other concerns will require more extensive thought. i think it fair to say, for example, that many firms were frustrated by the limitations on how much supervisors would communicate about modeling assumptions and other information relevant to capital planning decisions. here, there is some tension between the desirability of providing more information to firms and the importance of not turning capital planning into a mechanical compliance exercise, in which firms simply run the federal reserve model, instead of developing and enhancing their own risk - management and capital planning capacities. we do not want to encourage a world in which everyone simply applies the same risk - management model, rather than engages in the important and multidimensional process of evaluating and modeling risk. but there should be ways to provide some further explanation of our modeling approach without leading to this outcome, particularly in the aftermath – rather than in the middle – of the supervisory exercise itself. as a first step along these lines, we hope the symposium and other channels for discussing good modeling practices will reduce the “ black box ” feeling of some of the firms. of course, good modeling – whether at a firm or at the federal reserve – should be adapted to take advantage of improved data and advances in risk management. it would not be desirable to fix upon a model and continue to use it even as it becomes stale and, thus, potentially misleading. in this regard, i note that the dodd - frank stress testing regime that we will implement requires that the bank holding companies themselves disclose the results of their own stress bis central bankers ’ speeches tests. this will be a valuable augmentation of the transparency around stress testing, providing markets and stakeholders with more information about the risk - management practices of bank holding companies and creating points of comparison with the federal reserve ’ s stress testing. more generally, there will be a good deal of continuity as we implement the stress testing requirements of

businesses, particularly in those industries with energyintensive production processes and those that purchase a large share of energy - intensive products, such as industrial chemicals and plastics. there is only limited evidence, most of it anecdotal, of passthrough to consumer prices from the run - up in energy prices. however, we are seeing the effects in the price data for certain energy - intensive categories, such as transportation. futures markets currently expect only limited increases in the price of crude oil this year. nevertheless, tight resource utilization is likely to put pressure on prices. the unemployment rate, at 5 percent in the second half of 2005, was down about 1 1 / 4 percentage points from its recent peak in early 2003 and at its lowest level in four years. meanwhile, the factory operating rate - - a measure of resource utilization in the manufacturing sector - - was 79. 6 percent in december, a rate that is approaching its 1972 - 2004 average of 79. 8 percent. within manufacturing, industries operating at utilization rates above their long - run averages include plastics and rubber products, iron and steel products, machinery, electronic products ( excluding computers ), and electrical equipment, appliances, and components. and although the overall high technology aggregate is below its long - run average rate of utilization, the operating rate at firms making computers and peripherals is above average, and the rate at manufacturers of communications equipment has risen significantly over the past year. as in the mid - to late - 1990s, resilient productivity growth appears to be helping contain the inflationary pressures that might otherwise be expected to accompany a narrowing margin of resource slack. that said, we at the federal reserve will remain vigilant for any sign of a deterioration in the inflation outlook. as i mentioned earlier, the core inflation rate has stayed relatively low in recent months, as rapid gains in productivity have tended to offset cost increases. reflecting these developments is a continued rise in corporate profits, which has allowed firms to further bolster their strong balance sheet positions. corporate balance sheets have improved dramatically over the past couple of years because of surging profits, low interest rates, and a concerted deleveraging, which have combined to reduce debt burdens and increase liquidity in the form of cash assets. generally speaking, the growth of profits and the related buildup of cash have been broadly distributed across industries. and with the sound corporate financial positions, credit spreads remain narrow, and bank lending terms remain favorable. these beneficial financial conditions, combined