You may seldom hear about them but these two high-profile ‘birds’ are equally important as the other two ‘beasts’ of the financial jungle. If bull and bears are undisputed beasts of the markets, hawks and doves impact things in the higher plane, especially monetary policy and other economic matters.
As we enter 2020, it is time to see beyond bulls and bears and check where India’s monetary policy is heading. Are things “hawkish” or “dovish” in the country’s economic policy and what should we expect next year?
But before we do that, let’s understand the real meaning of Hawks and Doves when it comes to monetary policy.
As interest rates are falling, the steepest in a decade since the global recession of 2008-09, this is the right time for you to apply for a personal loan. With a Bajaj Finserv personal loan available on Finserv MARKETS you are assured of minimum documentation, speedy loan disbursal, flexible terms and attractive personal loan interest rates.
What is ‘Hawkish Economic Policy’?
If you know the term “hawkish,” which means someone who takes a tough stand on things, you will get the idea. Hawks have a sharp eye and a razor-sharp focus. When it comes to monetary policy, hawks are primarily focused on keeping inflation in check by supporting a high-interest rate regime. In sharp contrast to a dove, they do not worry about things such as high unemployment rates and slowing economic growth.
What is ‘Dove Economic Policy’?
So, what does the dove stand for? It stands for peace; a softer approach to things compared to a hawk, which is more aggressive. A dove will support and advocate low-interest rates because their objective is to focus on economic indicators such as low employment rather than low inflation.
An economic policy advisor who is a dove believes that low-interest rates boost economic growth by encouraging consumer borrowings which results in increased consumer spending. If there’s a single yardstick that differentiates a hawk and a dove, it is their approach to interest rates. In simple words, hawks prefer higher interest rates and doves prefer lower interest rates.
Is India taking a Hawkish or Dovish stance leading to 2020?
Well, it’s quite clear that India’s economic policymakers have played the role of a dove quite well, especially in 2019. In 2019, the Reserve Bank of India (RBI) made five consecutive rate cuts within a span of 8 months from February-October 2019. The central bank reduced the repo rate by a total of 135 bps during the same period. 
RBI Repo Rate Cuts since Feb, 2019
However, it is also a fact that indefinite low-interest rates spell can lead to high inflation rates which can again be detrimental for the economy. As steep hikes in prices of onions, fuel and other essential items are already crippling the household budget; a high inflation rate at this stage may deal a deadly blow on household expenditure and savings. This will further reduce retail consumption and accelerate the slowdown.
After 5 consecutive repo rate cuts in 8 months, the RBI decided to keep the repo rate unchanged at 5.15% in its Monetary Policy Committee (MPC) meeting on December 5, 2019. As expected, the reason was inflationary pressure. The RBI has also revised its inflation rate forecast from 3.5-3.7% to 4.7-5.1% for the second half of FY 2019-20.
Are these signs of things to come? Will RBI change its stance from dovish to hawkish now? That doesn’t seem likely in the short term but it may have to do so to check high inflation rates in the near future.
Do you know that even a reduction in interest rates by a few basis points can make a lot of impact on your EMI outflow? As interest rates are an all-time low, now is the right time to apply for a personal loan on Finserv MARKETS and benefit from reduced personal loan interest rates and flexible tenures of 12-60 months. If you have delayed on that foreign destination holiday or your home renovation plan, don’t wait further and get started with a Bajaj Finserv personal loan up to Rs. 25 lakh on Finserv MARKETS, today!
Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you Make it Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!