A dove is someone who favors a looser monetary policy, which means lower interest rates, with the aim of boosting economic growth.
This should increase spending, benefitting the economy, and increasing employment. But it comes with the risk of rising inflation.
Lower interest rates tend to encourage investors to move their capital into higher-risk assets and discourage saving. This can have a positive effect on the equities and equity indices within an economy.
Lowering interest rates makes government bonds less attractive to foreign investors. This reduces demand for the country’s currency and can cause the currency to fall.
Hawks and doves are terms used by analysts and traders to categorize members of central bank committees by their probable voting direction ahead of monetary policy meetings.
Hawks are those that want to see higher interest rates, while doves are those who would prefer interest rates to remain low.
Being “dovish” refers to the tone of language when describing a non-aggressive stance or viewpoint regarding a specific economic event or action.
In forex, the terms “hawkish” and “dovish” refer to the attitude of central bank officials toward managing the balance between inflation and growth.
|Hawkish||Rising inflation||Higher interest rates|
|Dovish||Slowing economic growth||Lower interest rates|