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Hawks and Doves

By Jonathan Lawton

Managing Partner, OpenAir Advisers

In finance, a hawk is someone who advocates keeping inflation low as the top priority in monetary policy. A dove, by contrast, is someone who emphasizes other issues like low unemployment over low inflation.

This is particularly interesting as we determine if our current inflationary environment is permanent or transitory. The hawk would look at commodity prices like oil and real estate, and say that the cost of goods is going up; we must raise interest rates. The dove would see the inflated unemployment rate and say, we need to wait until unemployment is under control before we raise rates. A little inflation is a good thing.

The terms are commonly used to describe members of the Federal Reserve Board of Governors, who have major influence on United States monetary policy as members of the Federal Open Market Committee. Doves generally are more in favor of expansionary monetary policy like quantitative easing while hawks tend to favor "tight" monetary policy seeing quantitative easing as a distortion of asset prices.

An individual can be a hawk in some cases and a dove in others. Janet Yellen, Chair of the Federal Reserve, was described as a hawk during the economic boom of the 1990s, but was described as a dove when she was nominated to Federal Reserve in 2021.

Whether you are a hawk or a dove is greatly dependent on the economic conditions of the day. If you believe that inflation is too high and advocate raising rates, you would be termed a hawk. If you believe commodity prices will settle out over time, you would be termed a dove. Alan Greenspan, Ben Bernanke, Jerome Powell, and Janet Yellen all have examples of being both dovish and hawkish based on the economic conditions they faced.

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