Specifically, the year-on-year rate of change in the CPI (all items less fresh food) is likely to be about 0 percent for the time being, due to the effects of the decline in energy prices, and, as the underlying trend in inflation steadily rises, accelerate toward 2 percent.
To some extent, the calculation of regulatory parameters for such low-default portfolios falls under what is known as the “turkey illusion”: Imagine you are a turkey. Every day you are approached by a man who feeds you. What kind of mental model of what happens when he appears do you think you’ll build up?