FOREX THEORY
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.
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.
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 the increasing of interest rates to reduce high inflation.
Dovish central bankers, on
the other hand, generally 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.
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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