The potential volatility of energy prices, commodity prices, and (to a lesser extent) import prices has been dramatically demonstrated in recent years and so unexpectedly rapid increases--or decreases, for that matter--in producers' nonwage costs can by no means be ruled out. Cost increases that are both large and sustained would, of course, create inflationary pressure. Lagged effects on inflation of the nonwage cost increases that occurred in 2004 are also possible, particularly if the firming of demand increases pricing power and the ability of producers to pass on their higher costs. I can assure you that the Federal Reserve will monitor closely any developments affecting producers' costs.