Global Market: Geopolitics overtakes inflation as top global risk for central banks
Why it matters: Nearly 100 central banks managing over $9.5 trillion in reserves are actively reassessing their investment strategies.
- Central Banking Publications survey of nearly 100 institutions managing over $9.5 trillion in reserves, conducted between January and March, reveals a significant shift in global risk perceptions.
- Nearly 70% of central banks now identify geopolitics as their top concern for 2025, up from 35% in 2024, according to findings cited by Reuters.
- Inflation and interest rates remain the most influential factors for reserve management over a five-year horizon for just over half of respondents, though their importance has moderated from 76% last year.
- The U.S. dollar's status as the primary safe-haven currency is still held by around 80% of reserve managers, but its long-term role is increasingly being scrutinized, with 16% of respondents saying its position will influence their reserve management decisions over the next five years, up from 3% last year.
- Confidence in U.S. government bonds has weakened, with only about one-third of central banks expecting them to outperform those of other major economies, a significant decline from over 70% in 2024.
- Gold continues to benefit from the uncertain geopolitical backdrop, with nearly three-quarters of central banks holding it and a growing number considering increasing their exposure.
Geopolitics has dramatically overtaken inflation as the top short-term risk for central banks, with nearly 70% identifying it as their primary concern for 2025, a sharp increase from 35% in 2024. This shift is prompting a re-evaluation of the U.S. dollar's long-term role and a decline in confidence in U.S. government bonds, while gold's appeal as a safe-haven asset continues to grow.
