At The Fed, The Revenge Of The Doves

Source: Forbes

The article on the front page of yesterday’s WSJ on the relative forecasting results of some of the Fed’s hawks and doves stirred some old memories regarding the hawk/dove divide. I got an unfair reputation as a dove back in 1999 when I dissented in June and again in August from the FOMC’s increase in the target Federal funds rate. That tightening was based on models showing a high likelihood of inflation during a period when actual inflation was still low.

Some in the press called me the Lone Star Loner, being the only dissenter. Others called me a dove. And pretty soon they were putting them together and calling me The Lonesome Dove. While I resented the dove label, my fondness for Texas writer Larry McMurtry and his Lonesome Dove weakened my resistance. I still have a drawing of Robert Duvall’s Gus on my wall. Then my lame defense became “I’m not really a dove—just a kinder and gentler hawk.”

A defense was necessary back then because only hawks went to central banker heaven. Doves need not imply. Hawks probably still have a better shot at it, but during the past few years Mr. Bernanke has at least made this world safer for doves. And, because financial markets have drunk the QE kool aid in recent years, super dove Janet Yellen is probably favored as Mr. Bernanke’s successor. How paradigms do shift.