Why dividing central bankers into hawks and doves misses the big picture

 Reducing central bankers to caricatures risks missing the big picture.

These days, policy makers have to be more nimble Central bankers have long been categorized as hawks, who prefer higher borrowing costs to keep a lid on inflation, or doves, who favor lower rates to juice growth. In normal times, these depictions help investors and observers know roughly what to expect policy-wise. But these are far from normal times, and such caricatures are more distracting than enlightening.
Consider India. Last week, the Reserve Bank continued to hold rates steady, as it has since mid-2020. When Prime Minister Narendra Modi’s government replaced half of the six-member panel in October, the lineup was widely judged to be more dovish. This was supposed to be a new-look committee, one that was sympathetic to easing. It hasn’t worked out that way. By comparison, the old guard took an axe to borrowing costs. Not only did the so-called doves stay grounded, but the RBI also announced it was reining in some emergency policies. On the face of it, the resistance is all the more puzzling because inflation had retreated in the lead-up to the meeting.

Did the doves suddenly become hawks? Unlikely. The RBI did say it was committed to being “accommodative” — rates came down by 115 basis points in 2020 — and will seek to make ample liquidity available. Officials are probably also counting on the government’s big fiscal expansion to do some lifting for them. The move shows central banking in the post-Covid era requires nimbleness and the ability to put ideology aside. Guiding philosophies developed over the course of careers in academia, the government, or the private sector no longer apply.

Flawed bird analogies are equally stark when you look at the monetary stances of advanced economies. Esther George, president of the Federal Reserve Bank of Kansas City, has often been characterized as one of the most hawkish U.S. officials, as was her predecessor, Thomas Hoenig. But last week, George said the Fed was still “far away” from achieving its goals and it was premature to mull scaling back its massive bond-buying program. Even Haruhiko Kuroda, the Bank of Japan governor sometimes considered an avatar for permanent easing, looks conservative relative to some of his colleagues. The BOJ has done less new stuff during the pandemic than the Fed or European Central Bank. Yet the BOJ arguably never stopped QE and was a pioneer of zero rates. Does that make Kuroda less of a dove? Does it matter?