In particular, according to the flash estimate,2 inflation was slightly lower than expected and stood at 8.5% in January, down from 10.1% in November. Furthermore, the strong fall in gas prices, the easing of global supply chain disruptions, the appreciation of the euro and tighter financing conditions (the latter reflecting, inter alia, our policy tightening) also pointed to inflation falling more strongly in the coming months than envisaged in December. At the same time, the fact that core inflation (5.2% in January, according to the flash estimate) has held at record high levels was a powerful reminder that price pressures remain strong, as past energy price rises continue to spread throughout the economy. All in all, this information led us to assess the risks to the inflation outlook as being more balanced, especially in the near term. As regards financial market-based indicators, in the run-up to our February meeting the riskfree forward curve continued to point to expectations of further interest rate increases in our subsequent meetings, including 50 bp hikes in both February and March, with a terminal market rate of around 3.47% (0.6 pp higher than before our December meeting). This was corroborated by analysts’ expectations, as reflected in surveys conducted shortly before the meeting.
To accommodate various stages of development in thinking and risk modelling, the New Accord offers three approaches for calculating a minimum operational risk capital charge. Two approaches - the Basic Indicator and Standardised Approaches - are, by design, simple and so inevitably are somewhat imprecise measures of operational risk. But when combined with the supervisory review process of Pillar Two  2  BIS Review 45/2003  and the transparency requirements laid out in Pillar 3, the Committee believes that they offer a reasonable point of departure and will spark additional efforts to refine banks’ approaches. For the most sophisticated institutions, the “advanced measurement approach” - or “AMA” - is the ultimate expression of the Committee’s goal to incorporate banks’ own sense of risk into the capital framework. Because the AMA is not subject to supervisory “floors,” the Committee expects it to serve as a true catalyst for innovation. We were pleased that the RMA Working Group on the Regulation of Operational Risk and others in the industry welcomed the Committee’s decision to allow banks to test a great variety of methodologies and measures under the AMA. Results of consultations From our review of public comments, and from our member agencies’ recent discussions with banks, we have noted a growing consensus that the revisions to the proposals have been positive. The operational risk framework has become more flexible, forward-looking, and better able to accommodate today’s best practices. Moreover, we are confident it is nimble enough to incorporate future advances.