Renewal of the Inflation-Control Target: Background Information (Ottawa: Bank of Canada. 2001). BIS Review 94/2007  3  time would lower real interest rates and help boost demand, thus requiring a smaller reduction in nominal interest rates. Put another way, the drop in prices below target would induce buyers to take advantage of the temporarily low prices.
As asset prices bubbles are typically associated with strong growth in bank credit to certain sectors such as real estate and stock markets, pre-emptive monetary actions could be reinforced by raising risk weights and provisioning norms for sectors witnessing very high credit growth.