Web Trader MT5
Dove refers to a central banker, or any policymaker, who keeps interest rates low and tolerates a little more inflation in exchange for stronger growth and lower unemployment. Doves are more concerned about the actual economy, jobs, output, and credit conditions than about the price stability part of the mandate of a central bank—the reverse of a hawk.
Practically, the designations are slippery. The same individual may well sound dovish in recession and sound significantly more hawkish when inflation is beginning to get out of control.
The actual direction of movement is what actually matters to the markets, whether the committee in general is becoming more dovish or more hawkish, because this direction of movement drives expectations about future rate decisions, which in turn drives bond yields, currencies, and risk assets.
Example: In the years after the 2008 financial crisis, Janet Yellen was widely regarded as one of the more dovish voices on the Federal Reserve’s rate-setting committee. She continued to stress the amount of slack still in the labor market and that one should not take a leap by increasing rates.
Such positioning informed market expectations regarding the pace of any eventual tightening, with direct implications for bond markets and overall risk appetite.
