he year of 2011 was an interesting and eventful year in monetary policy. As the chart below shows, the GDP weighted average interest rate of central banks crept up in the first half of the year as commodity prices remained buoyant, economic recoveries showed signs of gaining momentum, and inflation was the key concern in emerging markets. But this was then followed by a reversal in course in the later part of the year as the specter of the European debt crisis and slowing global growth raised downside risks for growth and price stability, spurring central bankers to cut rates and otherwise ease policy settings.

So as we enter 2012, it is a worthy and formidable question to ask what will 2012 bring for global monetary policy? Will it be a one way road to lower interest rates as emerging markets like China start to loosen policy? Will there be more non-conventional policy moves like quantitative easing in the US or EU? Or will inflation and growth actually surprise to the upside and catch central bankers off guard?

At this point we turn it over to our loyal readers to come up with their own predictions for monetary policy in 2012. Please submit your top 5 predictions for monetary policy and central banking in 2012 in the comments below, or email them to us. We will post a follow up article with the most popular and controversial predictions, with due attribution and links to blogs where appropriate (or no attribution for those who wish to remain anonymous).

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