Geopolitics Overtakes Inflation as Top Central Bank Concern
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- Central Banking Publications surveyed roughly 100 institutions managing more than $9.5 trillion in reserves between January and March, finding that nearly 70% identified geopolitics as their top concern in 2025, up sharply from 35% in 2024
- Inflation and interest rates still dominate the five-year horizon for about half of respondents, down from 76% a year ago, while nearly 30% now flag geopolitics as the most influential long-term factor—double the prior year's share
- The U.S. dollar retains its safe-haven status with roughly 80% of reserve managers still viewing it as primary, but 16% now say the dollar's position will influence their reserve decisions over the next five years, compared with just over 3% last year
- The greenback has declined more than 12% against a basket of major currencies between early last year and this year before partially recovering, reflecting the same pressure driving reserve managers to reassess US assets
- Confidence in U.S. government bonds has weakened, with only about one-third of central banks expecting them to outperform bonds from G7 nations and China, down from more than half last year and over 70% in 2024
- Gold holdings are expanding, with nearly three-quarters of central banks reporting gold in their reserves and a growing number considering increasing exposure as a hedge against geopolitical volatility
Why it matters: Reserve managers controlling $9.5 trillion are quietly diversifying away from dollar assets—the share citing U.S. bonds as likely outperformers has collapsed from 70% to 33% in one year, and 16% now say the dollar's global role will shape their five-year allocation. That erosion is uneven and gradual rather than a break, but it is the clearest signal yet that geopolitical fragmentation is rewriting the long-term assumptions underwriting the greenback.
