Hawk
Candlefocus EditorInflation is an increase in the price of goods and services and is caused when economic growth outpaces an economy’s natural ability to produce a currency fast enough to meet the new demand. As the cost of goods and services increase, people’s purchasing power decreases and they must use more money to get the same item. In this situation, the federal government can choose to intervene to help dampen inflation by instituting higher interest rates to raise the cost of borrowing money for individuals and businesses.
The opposite of hawks are doves. Doves, who prefer an interest rate policy that is more accommodative, believe that lower interest rates can stimulate spending in an economy and help those who are struggling financially. Ultimately, policy makers may become hawkish or dovish depending on the state of the U. S. economy.
For example, if the U.S economy is experiencing economic growth (such as low unemployment and/or rising wages) and the risk of inflation is greater, the Federal Reserve Board and other policy makers may decide to become hawkish and move toward tighter monetary policies, such as higher interest rates. On the other hand, if the U.S. economy is in a recession, the government has the option of dovish policies in the form of quantitative easing, which involves releasing more money into the system to help stimulate economic growth.
Hawks and doves, who typically come from different economic schools of thought, represent different approaches to macroeconomic policy. Hawks take a more traditional stance on inflation control, whereas doves prefer a more modern approach. Ultimately, policy makers carefully consider international and domestic events in order to determine whether to favor hawkish or dovish policies.