When short-term interest rates hit zero, the central bank may have to go back to monetary targeting to distinguish more-expansionary from less-expansionary policies, all of which entail short-term nominal interest rates close to zero.
In these circumstances, with prices actually falling, the central bank may have little choice but to expand liquidity quite rapidly in the hope that the liquidity will arrest deflation, even if nominal short rates remain stuck in the neighborhood of zero for a range of monetary growth rates. Bubbles The issue du jour in monetary policymaking is asset price bubbles.