You may remember that in the quarters that followed the invasion of Ukraine, growth prospects were regularly revised downwards, as our European economy suffered in particular from high energy prices, fear of a shortage in energy sources, and hence general uncertainty - and even worries about how we would get through the winter. Europe reacted swiftly, diversifying its sources of energy supply, and global market prices decreased sharply, especially from the fourth quarter of 2022. In the end, the euro area economy expanded by 3.6% in 2022, still higher than in the US, despite a slowdown in the second half. The likelihood of a recession in 2023 is now very remote, and growth prospects have even been revised upwards, to 1.0% in 20231 (up by 0.5 percentage point compared with December forecasts), before rebounding to 1.6% in 2024 and 2025. Faced with a historic geopolitical and economic shock, Europe has shown remarkable resilience, and greater unity. Euro area inflation further accelerated after the invasion of Ukraine, but the outlook for 2023 and beyond has also recently improved – although with mixed news. On the one hand, the earlier-than-expected easing in energy prices has led to a decrease in headline inflation since October 2022, from 10.6% to 6.9% in March2 – though this level is obviously still far too high. We also expect tensions on food prices, which have soared since 2022, to start fading from the third quarter of 2023, in the wake of the recent sharp decrease on international markets.
Historical data does not always predict the future and so we should not place too much confidence in models. A floor may be  BIS central bankers’ speeches  5  necessary to prevent the combination of low risk weights and high leverage from becoming unreasonable. Most of what I have been saying here has been said by us at the Riksbank for some time. We have encountered both counterarguments and cries of encouragement. We have also been asked if we couldn’t be more precise. Consequently, I thought I would wrap up by telling you a little about what will be happening in the immediate future. The Riksbank will clarify its recommendations soon When motorway junctions are planned, the traffic planners take many factors into account to ensure that the traffic flows smoothly and safely. Benefit is balanced against cost – and safety is given a high priority. We at the Riksbank take the same approach when we and other authorities are considering how to implement Basel III in Sweden. The Riksbank will soon announce its view of the measures that should be adopted. One example is how much higher we think that the capital adequacy requirements for the major banks should be – in addition to the minimum levels in Basel III. One important step is this year’s second Financial Stability Report, to be published on 29 November. In connection with this, we will also publish a report analysing the economically appropriate capital adequacy requirements for the major Swedish banks.