Hawkish vs. Dovish Central Banks

Yes, you’re in the right place.

Tonight’s match puts the L.A. Hawks up against the N.Y. Doves.

You’re in for a treat. Wait, what?!

Whoops sorry, wrong subject.

We really just meant hawks versus doves, central bank hawks versus central bank doves that is.

Central bankers can be viewed as either hawkish or dovish, depending on how they approach certain economic situations.

What does it mean to be “hawkish”?

Central bankers are described as “hawkish” when they are in support of the raising of interest rates to fight inflation, even to the detriment of economic growth and employment.

They are known as “hawks” and use words like “tighten” and “heating up” will be used.

For example, “The Bank of England suggests the existence of a threat of high inflation.”

The Bank of England could be described as being hawkish if they made an official statement leaning towards increasing of interest rates to reduce high inflation.

What does it mean to be “dovish”?

On the other hand (or claw?), central bankers are described as “dovish” when they favor economic growth and employment over-tightening interest rates.

They also tend to have a more non-aggressive stance or viewpoint regarding a specific economic event or action.

They are known as “doves” and use words like “soften” and “cooling down” will be used.

And the winner is… It’s a tie!

Well, sort of.

You’ll find many a banker “on the fence”, exhibiting both hawkish and dovish tendencies. However, true colors tend to shine when extreme market conditions occur.

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