For example, the capital rules require banks to maintain capital ratios that meet or exceed fixed minimum standards. Because banks typically find raising capital to be difficult in economic downturns or periods of financial stress, their best means of boosting regulatory capital ratios during difficult periods may be to reduce new lending, perhaps more so than is justified by the credit environment.
While the argument at the moment is that a price level target allows the central bank to let the economy grow more strongly after a period of unexpectedly low inflation, again I do not think that practically this will deliver better outcomes than a flexible inflation target. That is an empirical question in the end which is worth testing.