Monday, July 15, 2013

What is the difference between a Hawk and a Dove?

We are always watching economic news very closely in our Live Trade Room and we often hear the term ‘dove’ and ‘hawk’ used to describe a member of the Fed committee as they discuss their views on economic policy.

What do these terms mean, and how can we use them to profit in our Live Trade Room?

Definition of 'Dove'
An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that inflation and its negative effects will have a minimal impact on society. This term is derived from the docile and placid nature of the bird of the same name, and is the opposite of the term "hawk".

Statements that suggest that inflation will have a minimal impact are called "dovish".

Definition of 'Hawk'
A policymaker or advisor who is predominantly concerned with interest rates as they relate to fiscal policy. A hawk generally favors relatively high interest rates in order to keep inflation in check. In other words, they are less concerned with economic growth than they are with recessionary pressure brought to bear by high inflation rates. 

Also known as "inflation hawk." 

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