The Federal Reserve System, or Fed, takes two types of stances when it comes to monetary policy. It can be difficult to tell from the tone of the statements whether they are dovish or hawkish. It pays to familiarize yourself with the terms and what they mean if you want to figure out how it affects your assets.
What Dovish And Hawkish Mean
A dovish tone from the Fed basically means that they are contemplating the potential growth of the economy, and intend to loosen monetary policy accordingly. A dovish tone is an indicator that interest rates are going to be slashed. A hawkish tone, on the other hand, means that the Fed is taking an aggressive stance on the monetary policy, and intends to tighten it considerably. This means that the Fed funds rate could potentially increase, along with inflation.
