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.
This would alleviate the problems posed by the zero bound. There is, however, concern about how a central bank would need to respond to certain shocks under price-level targeting. Under inflation targeting as it is now practised, one-off relative price movements or changes in indirect taxes would not trigger a monetary response as long as inflation expectations remain anchored.