What does it mean to be hawkish?
Hawks vote for tighter monetary policy – meaning higher interest rates – with the aim of keeping inflation in check. This often comes at the expense of economic growth, as higher interest rates discourage borrowing and encourage saving.
Higher interest rates tend to have a negative impact on stocks and indices within the affected economy, as investors sell assets in favour of lower-risk investments that still offer strong returns. This can in turn cause the economy’s currency to rise.
As an example, doves tend to be in favour of quantitative easing, seeing it as a way to stimulate the economy. In contrast, hawks usually oppose quantitative easing, viewing it as a distortion of asset markets.
It’s important to note that a person’s hawkish or dovish learnings are not set in stone. For instance, Alan Greenspan, who was chairman of the US Federal Reserve between 1987 and 2006, was said to be a hawk when he first entered the position. However, throughout the 1990s, Greenspan’s views changed to more closely reflect the ideology of doves.
Policy makers and advisors who sit on the fence, shift their stance or do not take an outright hawkish or dovish position, are referred to as pigeons.