Hawkish Economic Policy:
As the US heads for a presidential election in November, the Federal Reserve, the country’s central bank, has signaled that it is unwilling to let interest rates soften in a hurry.
- Hawkish economic policy refers to a stance taken by central banks or other economic policymakers that emphasizes the importance of controlling inflation, often at the expense of other economic goals like full employment or economic growth.
- Policymakers who are “hawkish” tend to favor higher interest rates to keep inflation in check and maintain price stability.
- This approach is often contrasted with “dovish” economic policy, which prioritizes stimulating economic growth and reducing unemployment, even if it means tolerating higher inflation.
Key characteristics of hawkish economic policy:
- Raising interest rates to make borrowing more expensive, which can reduce spending and investment, thereby cooling off an overheating economy.
- Implementing measures to reduce the money supply or slow its growth, which can help control inflation.
- Prioritizing low inflation as a primary goal, often setting explicit inflation targets and taking actions to ensure they are met.
- Cutting back on fiscal or monetary stimulus measures that could spur inflation, such as reducing government spending or unwinding quantitative easing programs.
