An inflation hawk, often just called a hawk in economic circles, is someone in a policymaking or advisory role who mainly focuses on how interest rates affect monetary policy.
So, what does it mean to be hawkish? Hawks are typically okay with raising interest rates to keep inflation in check, even if it comes at the cost of slowing down economic growth, reducing consumer spending, and impacting jobs.
In contrast, a hawk is the opposite of a dove.
Learn more about Inflation Hawk
A hawk usually prefers higher interest rates if it helps keep inflation under control. Basically, hawks care less about boosting economic growth and are more worried about the risks of a recession that can come from high inflation.
Whether being hawkish is the right approach really depends on how strong the economy is and other big-picture economic factors. That’s because while hawkish policies can help reduce inflation, they might also cause the economy to shrink and increase unemployment, and in some cases, they could even lead to deflation.
While the term “hawk” is often used in the context of monetary policy, it can apply to various situations. In each case, it describes someone who is very focused on a specific part of a larger goal. For instance, a budget hawk prioritizes the federal budget above all else, while a war hawk advocates for military action to settle conflicts instead of using diplomacy or restraint.
Pros and Cons
Pros
- Can stem runaway inflation
- Increases the savings rate
- Cheaper imports
- Tourists to foreign destinations have greater purchasing power
Cons
- Can hurt domestic producers
- Makes borrowing more expensive for consumers and firms
- Can lead to deflation
Conclusion
Inflation hawks push for swift actions to tackle inflation, like significantly increasing interest rates and implementing other tightening strategies. They argue that keeping inflation rates low, ideally between 2% and 3%, is crucial, even if it means sacrificing some economic growth or jobs. On the flip side, those who take a more lenient approach are referred to as doves.