A hawk would rather rates go higher:tighter money to cool the fire.
A term describing a central bank stance that favours higher interest rates and tighter monetary policy to control inflation.
A currency has historically tended to strengthen when its central bank sounds more hawkish than expected, although the reaction depends on what was already expected.
In plain words
A central bank, or one of its officials, is called hawkish when they lean towards higher interest rates or tighter policy, usually because they are more worried about inflation than about weak growth. The opposite leaning is called dovish.
See it move
Inflation worry outweighs Growth worry
Why it matters
Traders read central bank statements and speeches for changes in tone, because expectations about future interest rates are one of the things currencies respond to. A statement more hawkish than expected is commonly associated with a firmer currency, though the reaction is not certain.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
A central bank leaves its interest rate unchanged, as expected, but changes the wording of its statement.
- 1Previous statementinflation is “expected to ease”
- 2New statementinflation is “proving persistent” and further rises “may be needed”
- 3The rate did not change, but the expected path of future rates moved higher
Commentators would describe the new statement as more hawkish than the last one.
A common mistake
Hawkish does not mean that rates have been raised. It describes a leaning, and a central bank can sound hawkish while leaving rates where they are.
Check yourself
Learn more
- Academy lessonCentral bank policyWho the major central banks are, how rate decisions, quantitative easing and forward guidance work, and how policy feeds through to currencies.
- ExplainerHow central bank decisions move currenciesRates, forward guidance and balance-sheet policy reach exchange rates through one channel above all: what the market expected beforehand.
Educational information, not investment advice or a recommendation to trade.