less rapidly. firms had built inventories at a rapid clip in 2004 and the first part of this year, and by late winter many businesses seemed to have been more satisfied with their inventory positions. consequently, they scaled back rebuilding efforts and trimmed the growth of production accordingly. still, activity rose rapidly enough to further erode margins of economic slack. the unemployment rate fell from 5. 4 percent at the end of last year to 4. 9 percent in august, and the rate of capacity utilization continued to rise toward its long - run average, though that increase was slowed with the production adjustment in the spring. measures of labor compensation have given somewhat mixed signals about how tight labor markets have become. the rate of increase in the measure of compensation per hour derived from the national income and product accounts moved up appreciably over the four quarters ended in mid - 2005 compared with the preceding year. this rise was apparently due in part to bonuses and stock options that may be only loosely related to labor market slack, however. moreover, according to the employment cost index, which is based on a survey of firms, and to the growth in average hourly earnings in the payroll employment report, compensation pressures remained quite subdued. on balance, i do not believe conditions in labor markets have become excessively taut, but experience suggests remaining humble in making any such assessment. i would like to thank stacey tevlin, lawrence slifman, vincent reinhart, and david stockton, of the board's staff, for valuable comments. 1 / 4 measures of core consumer inflation eased some over the late spring and early summer, even as headline inflation was pushed higher by rising energy prices. in addition to the favorable news on core inflation, observations from the financial markets showed that forward measures of inflation compensation beyond the next few years - - the difference between distant forward rates on nominal and indexed debt - - moved down over the spring, despite the rising energy prices. even so, core inflation had moved higher in 2004, interest rates were still low, and the economy seemed to be expanding at a pace that over time could threaten to impart added upward pressure on inflation. as a consequence, the fomc indicated in its august announcement that its intention, in the absence of unexpected developments, was to continue to remove monetary policy accommodation at a measured pace. hurricanes are obviously the very embodiments of unexpected developments. among other effects of hurricanes katrina and rita, they have materially increased uncertainty about the economic outlook. the questions

alan greenspan : empowering communities, attracting development capital and creating opportunities remarks by mr alan greenspan, chairman of the board of governors of the us federal reserve system, at the 2005 national community reinvestment coalition conference, washington dc, 18 march 2005. * * * it is a pleasure to join this group that is dedicated to developing strategies for ensuring that opportunities for economic advancement are available to all americans, including members of lower - income families and communities. in a couple of years, we will celebrate the thirtieth anniversary of the community reinvestment act ( cra ). to date, this act has brought many successes, but much remains to be accomplished. before passage of the cra, lending to underserved populations was often considered an act of goodwill, not good business. i do not disparage benevolence, but i believe that one of the most enduring achievements of the cra has been that lenders, often to their surprise, have found low - income community lending to be a normal extension of their outreach for profitable business. mortgage and consumer lending is driven by credit analysis, and for small - business lending, also by a belief in the potential success of the business venture. because it is critical that low - and moderate - income lending be, and be perceived as, an extension of regular business practice, we have been building a substantial database on low - income credit experience and business opportunities. this information has been critical to the successes in low - income lending. but information collection and analysis must reach further. if communities are going to be empowered, they need hard evidence of their successes and, yes, hard evidence of their failures, which, as you know, can point the way toward success. accordingly, i would like to emphasize the important role of program assessment in the community development process. success of these programs can be understood only through measurement and critical analysis. to date, systematic research on community economic development programs has been limited. one of your challenges then is to expand the information about the impact of your activities so that you can demonstrate the viability of your efforts and replicate local models of success for the benefit of other communities and families. measuring the impact of community economic development programs the overarching objective of community economic development and empowerment is to help underserved populations accumulate assets and improve their economic well - being. measuring the results of programs dedicated to this objective is essential to effectively managing scarce resources and maximizing the impact of these programs.