Surely there are still some who are confused about the difference between hawkish and dovish right?
Usually it is associated with a speech from the Governor or Chairman of the central bank. However, all these comments depend on the approach to the particular economic situation.
Hawkish
The term hawkish describes a central bank's stance that tends towards tightening monetary policy or raising interest rates to fight inflation.
It shows a more aggressive approach to monetary policy, where policymakers are willing to take steps to prevent inflation from soaring.
For example, the Federal Reserve (Fed) says inflation is still high and economic data also remains strong. In order to maintain price stability and control inflation, the central bank is considering continuing to raise interest rates at its next meeting.
Dovish
Dovish is the opposite of hawkish, referring to a central bank's stance that tends toward easing monetary policy or lowering interest rates to stimulate economic growth.
It shows a more passive approach to monetary policy, where policymakers are willing to tolerate inflation or slow economic growth to support jobs and stabilize the economy.
For example, the Federal Reserve (Fed) says the economy is not growing as expected and inflation is below target levels. To support economic growth and employment, the central bank is considering lowering interest rates at its next meeting.
Is it easy to understand?
After this, when any central bank policy maker gives a speech, try to pay attention to their statements. Hawkish or dovish. So that will be an indication for the setting of the future monetary policy.
