This adjective originates from the word ‘Dove’ - a very delicate, careful bird - which has an analogy with the term ‘dovish’ in the world of Forex. It refers to the tone of voice the Central Bank chooses when speaking about inflation. In case of the dovish policy, no radical measures will be taken to raise interest rates.
The dovish policy aims at increasing spendings and employment but may lead to the risk of inflation rise. For investors, it may be a good time to stop saving and invest in higher-risk assets. Trading stocks and indices usually become more profitable. However, the national currency loses in price.
The term is opposed to Hawkish.
2020-04-24 • Updated