This is due largely to significant excess supply in the economy and heightened competition in the retail sector. The path for inflation is now expected to be lower than previously anticipated for most of the projection period.
To illustrate this point, the new Basel III regulatory framework requires credit institutions to hold significantly more higher-quality capital than before. In addition, global systemically important banks need to additionally strengthen their capital base so that they can bear potential losses unassisted. The idea is to enhance banks’ resilience and avoid putting taxpayers back on the hook for banks’ losses in future crises.