The US  Federal Reserve has a joint mandate to maximize employment and maintain low inflation. Actually, there is a third part to the mandate - to limit interest rate volatility - but that aspect rarely comes into play.  Given that monetary policy is fundamentally about the management of aggregate demand, any Fed policy that pushes towards one goal, for example higher employment, will move them away from the other goal.
A hawk is a FOMC (Federal Open Market Committee) member who puts more weight on the inflation goal. 
With the joint mandate, hawks generally think these are not independent objectives and that by focusing on inflation they make the best possible contribution to growth and to promote employment. Hawks are more inclined to favour tight policy to prevent excess inflation.
When it comes to targetting the inflation rate, some hawks still back 1.5 per cent while most of the committee is now at 2 per cent.
A dove is a FOMC (Federal Open Market Committee) member who puts more independent weight on the employment goal. This person would tend to be described as dovish
The 12-member committee that sets US monetary policy. The FOMC holds meetings every six weeks at which it decides whether to change either of the two key interest rates, the Fed funds target and the discount rate. The statement released after the meeting is carefully monitored by the markets for signals on the Fed bias and any forward-looking views on the economy.
                                                                                                                                        Source: Financial Express

Thursday, 03rd Sep 2015, 09:40:36 AM

Add Your Comment:
Post Comment