This “automatic” provision of added stimulus could be particularly useful when conventional monetary policy is exhausted at the ZLB, while the rise in near-term inflation expectations would be self-limiting by design, unwinding as the price level approached the desired path.
PLT may merit consideration as a temporary unconventional policy tool in countries faced with extraordinary circumstances, notably those with policy at the ZLB and with a heavy burden of debt.4 However, it is not clear that it would help much under the current circumstances faced by the crisis economies.