I think "layer 2" is a bit of a misnomer, or a false dichotomy. There will likely be some small degree of layer 1 functionality that is part of the "layer 2" smart contracts. For example, account balances that are controllable by a contract. So inflation could pay to one of those accounts. This is worth bringing up when the framework is being defined later.
RE: Why I set my witness HBD interest rate parameter to 7%