Hawk

Definition

Hawkish refers to policymakers or advisors who are generally concerned with the potential impact of interest rates on monetary policy. They are seen as willing to allow interest rates to rise to control inflation, even if it means sacrificing economic growth, consumer spending, and employment.

Origin

The term "hawkish" originated in the mid-20th century in the United States, initially used to describe those with a hardline stance on military and foreign policy. It was later adopted in economics to describe policymakers who favor tight monetary policies to curb inflation.

Categories and Features

Hawkish policymakers are typically divided into two categories: extreme hawks, who advocate for rapid interest rate hikes to immediately curb inflation, and moderate hawks, who support gradual rate increases to control inflation while minimizing economic shock. The main feature of hawkishness is a high sensitivity to inflation and a relatively secondary focus on economic growth.

Case Studies

A classic example is the early 1980s in the United States when Federal Reserve Chairman Paul Volcker implemented aggressive interest rate hikes to combat high inflation, despite causing a short-term recession. Another example is the mid-2010s Bank of England, which adopted a relatively hawkish stance during the early stages of economic recovery to prevent inflation expectations from spiraling out of control.

Common Issues

Investors often misunderstand that hawkish policies will immediately lead to a recession. In reality, the goal of hawkish policies is to achieve long-term economic stability by controlling inflation. Additionally, hawkish policies can lead to market volatility, so investors should be mindful of risk management.