Constraints on QE are coming into view

▀ The MPC's self‐imposed limits on QE mean it could run out of room for more asset purchases should another major economic shock, such as from another global lockdown, hit in the near future. This raises the odds of negative interest rates in our view. ▀ By the end of 2021 the BoE may own over half of conventional gilts. This would make repeating the QE response on the scale seen last year difficult, were the MPC to maintain its current criteria on purchases. Relaxing those criteria would raise its own problems. ▀ But with vaccine developments shifting economic risks to the upside, and a political and economic climate favourable to loose fiscal policy, questions of QE headroom could prove academic. Still, they may have a bearing when the MPC eventually decides to tighten policy.