This is because, for a given equilibrium real interest rate, a higher inflation objective implies higher nominal rates over the cycle. In line with the results from a larger research literature, ECB simulations made in 2003 suggested that a 2% objective would substantially decrease the probability of nominal rates reaching zero.
2 This was also recognised by the Governing Council as a reason for aiming closer to 2%. 3 What was true then has become even more relevant now. The studies in 2003 assumed an equilibrium real rate of around 2%, so with a 2% inflation objective the equilibrium nominal rate would be around 4%.