Firstly, if wages and prices are sticky downward, it may require a higher level of unemployment to stabilise the overall inflation rate at zero than at some higher number.2 Secondly, since nominal interest rates cannot go below zero, it will become impossible to engineer negative (or even very low) real interest rates to help recovery from a recession.
Such considerations have led most observers to favour a low but positive rate of inflation. Those who prefer zero tend to point to the distortionary effects of the tax system,3 or to the risk that any positive number can be revised up, as justifying the more ambitious target. 1  Fischer, Stanley: "Why are Central Banks Pursuing Long-Run Price Stability?"