Asset manager UBS Asset Management publishes the results of its annual ‘Annual Reserve Manager Survey’, a joint study in which thirty central banks worldwide participate. This year, special attention is paid to central banks ‘ vision of digital currencies, says Massimiliano Castelli, Head of Strategy & Advice, Global Sovereign Markets at UBS AM. Key research findings: Macroeconomic: failure to end the pandemic is the main concern of central banks (79%), followed by rising debt (71%) and fear of inflation (57%). Last year’s survey did not mention inflation at all. Macro and financial: lower / negative bond market yields are cited as a concern by 86% of respondents, in line with the survey results of the last three years. Followed by rising interest rates and inflation, mentioned by 64% of the institutions surveyed. That is a dramatic increase compared to last year’s 6%. 67% of participants expect the Fed to raise interest rates in 2023. Strategic asset allocation: the trend to further diversify portfolios across asset classes continued during the pandemic. Shares qualify as investment class for 40% of central banks. For emerging market debt, that percentage has risen sharply to 54%. 21% of the central banks surveyed are considering investing in illiquid asset classes such as real estate and infrastructure. There is also a shift in 2021 towards investments that offer protection against inflation. Currencies: the RMB is quietly continuing the marathon to become a major reserve currency in the world; the average long-term target allocation to the Chinese currency has risen to 5.7%. Demand for USD declined during the year and demand for assets issued in euro increased. Sustainability: 19% of participants consider adding sustainability as a fourth management objective. 31% of respondents indicate that they have recently switched from traditional to ESG benchmarks or are considering doing so in the short term. Central bank digital currencies: nearly 40% of respondents expect so-called CBDCs or digital central bank money to become available to businesses and citizens in the next three years. Fighting crime and money laundering and the pressure of commercial cryptocurrencies are cited as the main reasons for this expectation. 71% of survey participants prefer a centralised system rather than a decentralised system. More than 60% of the respondents do not believe that the launch of a digital central bank money will lead to a reduced role of the Us dollar by more than 50% don’t yet know what the impact of the digital Yuan, to the further internationalisation of the Chinese currency.