Dovish

Dovish is shorthand for a policy stance or message that favours easier monetary policy: cutting rates, delaying hikes, or keeping asset purchases going. Its opposite is hawkish. Doves tend to worry more about weak growth and unemployment than about inflation.

How it shows up

• A rate cut, or a signal that cuts are coming.
• Statements emphasising downside risks to growth, a weakening labour market or inflation falling back to target.
• More policymakers voting for a cut than expected.
• A lower path for rates in the central bank's own projections, where published.

Why currencies react

Lower expected interest rates make a currency less attractive to hold, so a dovish surprise tends to weigh on it. The key word is surprise: if markets already expect a cut, a cut delivered with dovish language may change little, while a cut accompanied by hawkish hints might even lift the currency.

Worked example

Illustratively, markets price a 30% chance that a central bank cuts at its next meeting. After a speech in which the governor says inflation is "no longer the main concern" and the labour market is "clearly cooling", pricing jumps to 70%. The currency may fall even though no decision has been taken, because forward guidance has shifted expectations.

Practical note

Dovish and hawkish are relative. A central bank can raise rates in a dovish way, by signalling it is the last hike. See central banks and interest rates and what moves currency prices.