Following an annual rate of inflation of 1.7% in the first quarter of 2004, inflation reached 2.3% in the second quarter and remained at that level in July and August. According to Eurostat’s flash estimate, annual HICP inflation seems to have fallen slightly in September, to 2.2%.
Basel II should establish a more coherent relationship between regulatory measures of capital adequacy and the day-to-day risk-focused supervision of banks, enabling examiners to better evaluate whether banks are holding prudent levels of capital given their risk profiles.