☆ Central bankers are often referred to as « hawks » or « doves. » What does this mean?

Ben Bernanke, former chairman of the Federal Reserve, was known to be more of a « dove » than a « hawk. » Janet Yellen, his successor, is also known to be more of a « dove. » What are we talking about?

Let’s start at the beginning. « Dove » is the English word for « colombe, » while « hawk » means « faucon. » The dove is a symbol of peace and pacifism. The hawk, on the other hand, is known for its predatory qualities and is often used to represent warmongers. On the one hand, we have pacifism, and on the other, the desire for war. What does this have to do with a central bank?

A central bank is responsible for monetary policy. Monetary policy is primarily about price stability. Only the central bank is capable of ensuring long-term price stability. But the central bank can also use its monetary policy to support the economy, in parallel with the government’s fiscal policy. If the central bank decides to support the economy, it will do so by making its monetary policy more accommodative (i.e., by lowering interest rates). This will also lead to inflation in the longer term. Under normal circumstances, there is therefore a trade-off between inflation and economic growth.

In this context, the term « hawk » is used to describe a central banker who is exclusively concerned with price stability, seeing economic growth as a matter for the government through its fiscal policy. A « dove, » on the other hand, will be more conciliatory, adopting « consensus » positions in the inflation/growth dilemma, leading to policies that mean more inflation but also more growth.

A « hawk » will therefore tend to vote against decisions likely to lead to higher inflation. They will be more in favor of high interest rates than a « dove. » The « dove » will be more conciliatory, showing a greater inclination to lower interest rates and take easing measures. A dove will therefore consider inflation to be more bearable for society than a hawk will. It could be summed up simply as follows: the more hawks there are on the monetary policy committee, the more likely we are to see high interest rates; the more doves there are, the more likely we are to see low rates.

The current Fed Chair, Janet Yellen, is known to be a dove. A typical example of a hawk is Bundesbank President Jens Weidmann, who often advocates a very strict separation of monetary policy from fiscal policy. Another German, Jürgen Stark, a former member of the ECB’s Executive Board, was known for his very hawkish positions. He resigned in September 2011 following the launch of the ECB’s bond-buying program, which he strongly opposed. Given the latest debates on the launch of a quantitative easing program by the ECB, we have certainly not heard the last of the opposition between « hawks » and « doves » in the news.