By contrast, food price inflation and underlying inflation (excluding energy and food) have continued to rise, surprising on the upside and posting high rates in March (of 15.4% and 5.7%, respectively). Headline inflation is expected to remain high for the rest of 2023, albeit on a downward path that will take it to 2.8% in the last quarter of the year. This drop in inflation is mainly explained by the energy component, while underlying inflation is expected to remain elevated. Specifically, the ECB projections point to inflation averaging 5.3% in 2023, before decreasing to 2.9% in 2024 and to 2.1% in 2025. This downward trend would be underpinned by the gradual disappearance of upward pressures from the reopening of the economy, previous supply-side shocks (supply bottlenecks and high energy prices) and euro depreciation, reinforced by increasing pass-through of the recent fall in energy prices and exchange rate appreciation. The fall in inflation in the medium term is also explained by a moderation in domestic demand pressures, owing inter alia to increasing dampening effects of our monetary policy decisions. Importantly, the staff projections incorporate a number of financial indicators that reflect market expectations of our future monetary policy. In this regard, the inflation path in the March staff projections was based on a risk-free forward curve that continued to point to expectations of further interest rate increases at our subsequent meetings, including 50 bp in March, to around 3.2%. This inferred terminal rate was 40 bp higher than that expected at our December meeting.
•  The third is the importance of regular vulnerability testing. We launched CBEST, a controlled, bespoke, voluntary cyber security testing framework which aims to bring to bear the best available intelligence on potential threats to test directly a firm’s ability to protect, detect and respond to cyber attacks. 2. Recovery capabilities  But even with improved ex ante resilience, no network is impenetrable. Hence why firms’ recovery capabilities are equally important. We still need firms to work to be able to resume vital services quickly and reliably in the event of operational disruption. We are keen to see firms adapt their approaches to business continuity planning to take account of cyber. One possibility raised in the FSR is seeking more segregation between primary and backup systems. 3. Effective governance  I mentioned earlier it is for firms in the first place to be responsible for their cyber resilience. I’ve also noted that cyber is about people as much as it is about technology. And let me be clear, the responsibility for understanding this risk extends beyond technology specialists; firms’ boards need to view cyber risk as a core strategic issue and be in a position to challenge senior management in all business areas on the adequacy of their arrangements to deliver cyber resilience. Going forward So this is where we’ve got to on cyber. But now it’s clear we need to place cyber on a more permanent footing.