The latest report on inflation and Fed watching from Standard & Poor’s takes a look at the Hawks and Doves metaphor and how it affects the markets. Here’s an excerpt:
“The recent “tapering” kerfuffle triggered by Federal Reserve Chairman Ben Bernanke’s comments after the June Federal Open Market Committee (FOMC) meeting (1), and speculation about who will succeed Mr. Bernanke when his term ends and he likely steps down at the end of January next year, have elicited much “bird-watching” commentary. Why did the FOMC suddenly sound so “hawkish?” Isn’t one of the front-runners to succeed Chairman Bernanke a bit too much on the “dovish” side to sail through the Senate confirmation hearings? And so on, with little insight generated.
Central bank watchers use the terms “hawks” and “doves” when describing the policy predilections of individual central bankers as if their meanings were clear. They aren’t–and they shouldn’t. The terms obscure so much that they should be avoided, or at least used with extreme caution. Better to examine the views of central bankers, both on substantive economic and monetary issues and on the state of the economy and its outlook, than put them in misleading boxes.
The term “hawk,” reflecting the notion of vigilance, is commonly used to describe a central banker who is tough on inflation. A “dove,” with its connotation of placidity, is one who is more relaxed, perhaps because he or she cares a lot about employment or some other…”
Purchase this report on inflation.