Everyone knows Bernanke is currently a dove on inflation says Erika Nolan in The Sovereign Society. But he may turn hawkish soon…

If you’re in the currency world, you’ll often hear about an inflation dove or an inflation hawk.

Usually in the news, the talking heads are discussing our very own dove, Fed Chief Ben Bernanke or the eternal inflation hawk, European Central Bank (ECB) President, Trichet.

But what’s the difference?

A hawk is known to be an aggressive predator that keeps a sharp eye out for potential prey. In a similar fashion, a “hawkish” central banker keeps a sharp eye on interest rates because they’re ready to swoop in and aggressively raise rates to fight inflation if necessary.

The dove has a harmless, docile nature. Therefore if you hear a central banker referred to as “dovish” or called an “inflation dove,” then he’s not concerned with inflation (think Ben Bernanke when he refuses to hike rates). He would rather lower interest rates because he feels inflation will have a minimal effect on society.

So these terms don’t describe the central bankers’ long-term stance on inflation, but just their current short-term views. These are likely to change over the course of their tenure.

During any Fed chairman’s tenure, he’s likely to raise interest rates and then lower them depending on the economy’s situation at the time. So the present view of the central bank is termed “hawkish” or “dovish.”

Up until now, “Uncle Ben” has proved he prefers doves to hawks. But down the road, he could change his tune (he’s known to do that every once in a while).

Source: What Gives a Dove His Wings?