In many cases they also act as a guarantor of transactions – the counterparty to every trade – thereby helping to reduce counterparty credit and liquidity risks. However, the flip side of the centralization of clearing and settlement activities in clearinghouses is the concentration of substantial financial and operational risk in a small number of organizations, a development with potentially important systemic implications.
The Bank therefore concluded that the benefits of a lower inflation target were insufficient to justify the increased risk of being constrained by the ZLB. Should we move to price-level targeting? The second question we addressed was whether there would be net benefits to adopting price-level targeting (PLT).