this may have for the appropriate future path of central bank balance sheets, including the pace and timing of any future unwind of asset purchases. but one conclusion is that it could be preferable, and consistent with setting monetary conditions consistent with the inflation target, to seek to ensure there is sufficient headroom for more potent expansion in central bank balance sheets when needed in the future – to “ go big ” and “ go fast ” decisively. that begs questions about when does the need for headroom become an issue? what are the limits? one way of looking at these questions is in terms of the stock of assets available for purchase. there is currently a large outstanding stock of government bonds which could be purchased. and if the state contingent effects of qe are driven by the need for holders of safe assets to exchange them for deposits, then it must always be possible for the central bank to purchase more assets. in other words, the central bank would need to own a high proportion of safe assets for that to become a constraint. but if negative shocks continue to arrive from time to time before any reversal of the stock of asset purchases takes place, and hence the stock owned by the central bank continues to rise, the odds of this situation arising go up. this effect may become more likely if the equilibrium real interest rate remains low for a prolonged period. expanding the range of assets purchased is another way for central banks to create more headroom. the covid crisis has seen a further broadening of the range of assets that central banks stand ready to purchase. in part, this has reflected another objective of central banks and governments, given the scale of the crisis and its economic effects, namely to direct and target funds to the corporate sector, and thus supplement the more normal role of banks and financial markets. but it also reflected a need to act on a broad front in terms of ensuring liquidity gets to the places where it is needed. where that requires larger purchases of a broader array of assets, it inevitably raises risk management questions for central banks. so, i think the covid crisis has demonstrated the need to ensure central banks have as many tools as possible in their box, of which expanded purchases of private sector assets is one, but given the issues it raises i would emphasise state contingency here in terms of when some tools may be more appropriate or necessary, given the severity or particular nature of the circumstances at the time. the mpc has considered its prospective approach to qe unwind

factor that will serve to prevent sudden price movements is the fact that the retirement of the baby - boomers can be anticipated. events that can be anticipated are not going to cause a collapse on the rationally based financial markets. thus, if the retirement of the baby - boom generation is seen to change the balance of supply and demand for financial instruments, the markets will already take this into account in their pricing years before the baby - boomers actually retire. the resistance of the financial markets will also be improved by a third factor. at least in those countries where pension cover is based to a considerable degree on private savings, there will be a mutual self - correcting interaction between the retirement of the baby - boomers and asset prices. if the approaching retirement of the baby - boom generation began to build up sales pressures on the asset markets and push down the prices of stocks, bonds and houses, this would reduce the value of the baby - boomers'own assets. many pension savers would then face a situation in which their pension assets would no longer allow them to maintain the standard of living they had hoped for in their retirement. some of those who had already planned to retire would then find themselves forced to stay on at work longer than they had intended. this would increase the level of pension savings and reduce the number of pensioners, improving the balance on the financial markets and preventing a price collapse. a study at the bank of finland by tuomas saarenheimo 1 on the financial market impact of ageing introduces another point of view that has received less attention in international discussion : the change in people's lifespan. this means higher life expectancy and, especially, longer retirement. from 1950 until the present day, the additional life expectancy of a person aged 60 has grown by around 5 years. it now stands at 22 years. by the year 2050 it is forecast to grow again by approximately another 5 years. the trend is more or less the same everywhere apart from those african countries that are suffering most from the aids epidemic. for the sustainability of public pension schemes it would be good if part of this longer lifespan could be devoted to remaining longer at work before retiring. so far, there exists only weak evidence of such a trend. the most likely outcome is that, in the future, most of these extra years will be spent in retirement. in the next few decades we can expect the time spent in retirement to increase by about a quarter. it is clear that an