Reserves managers face up to tough investment environment
Capital preservation and liquidity key as central banks expect inflation to remain higher for longer.
Most central bank reserves managers are resigned to a period of higher inflation and lower returns, according to a report published by OMFIF.
More than 75% of the central banks surveyed for the 2022 edition of Global Public Investor believe inflation will be sustainably higher or more volatile for a prolonged period. Just 20% of reserves managers think inflation will be transitory.
At the same time, central banks believe the new macroeconomic environment will cause their portfolios to suffer. More than 70% say that they have accepted lower real returns or that their decision-making has not been affected by rising inflation. Faced with volatile and falling markets, capital preservation and liquidity have become more vital than ever for reserves managers, with more than 90% saying these are now their most important investment objectives.
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