Hence, a drop in the price level will lead to an automatic rise in inflation expectations. This movement of inflation expectations mitigates the effect of the original shock on the inflation rate. Consequently, for a given nominal interest rate, the real interest rate decreases. This stimulates aggregate demand and, in turn, keeps the required nominal interest reduction to a minimum.
Hence, a credible price-level targeting regime lowers the risk of hitting the zero bound and falling into a deflationary trap following a negative goods demand shock.