Hawkish
A monetary policy is called hawkish when it restricts the circulation of money in the market and when it raises interest rates to counter inflation.
These policies can be undertaken either by central banks (FED for the US and ECB for Europe) or by monetary policy bodies and can be influenced by entrepreneurs, politicians or journalists.
Although this terminology tends to have a negative connotation, hawkish restrictive policies can lead to numerous benefits in the long run.
Indeed, higher interest rates have a strong counteracting impact on inflation as they keep price levels high, causing consumers to limit their consumerism. These policies also make it more difficult to apply for mortgages and make investments, leading companies to economise on new projects and limit their hiring budgets.
At the opposite end we can find ‘dovish‘ monetary policies, which are more accommodative and tend to increase the money supply in the market by lowering prices.
