Does the hawk-dove distinction still matter in the modern Fed?

Interesting article by Tim Sablik of Richmond Fed.

Comparing Fed/central bank members as birds goes back to war generals:

Fed watching can seem a lot like bird watching. “Behind the Fed’s Dovish Turn on Rates,” reads a recent Wall Street Journal headline; “Fed Hawk Down,” reads the Washington Post announcement of the retirement of a Fed bank president. “Hawk” and “dove” have commonly been used by the financial press to describe Fed policymakers since the 1980s, and the term “inflation hawk” can be found as far back as the late 1960s. Both birds have even longer traditions as wartime metaphors. The dove has been a symbol of peace going back to biblical times, and leading up to the War of 1812, American politicians who advocated confrontation with Great Britain were labeled “War Hawks.” But what do these terms have to do with monetary policy?

Hawk and dove are often used to describe a divide over the Fed’s dual mandate of promoting maximum employment and price stability. Hawks are said to worry more about price stability and favor relatively tighter monetary policy to keep inflation in check. Doves are viewed as more open to the possibility that monetary policy can keep unemployment low and more inclined to use accommodative policy to attempt to do so.

The reason for the perceived divide is that the Fed cannot always achieve both objectives at the same time, at least in the short run. Expanding the money supply to boost aggregate demand during a recession can help lower unemployment, but it also can create inflationary pressure. By the same token, tightening can reduce inflation but it can also raise unemployment, as it did during the recession of 1981-1982.

In the past, Fed officials disagreed about the proper focus and targets for monetary policy. But has that debate changed today? In 2012, the Fed adopted an explicit long-run inflation goal of 2 percent, suggesting a consensus on the goal of price stability. In the wake of that decision, then-president of the Cleveland Fed Sandra Pianalto commented that the bird labels had become obsolete. “We now have agreement” on inflation, she said. “So I don’t think the titles of hawks and doves are useful.”

In war one would prefer a dove but in mon pol being a hawk matters. And then just like both kinds of war generals have created problems. Same is true for central bankers as well. Both war generals and central bankers think they really control affairs but nothing could be further from truth. Elements of luck and destiny play a great role in defining both these types of occupations.

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