So, this is new

For the first time ever, the Bank of Canada has released a summary of the deliberations at its Governing Council meeting. This readout relates to the meeting on January 25, at which the Bank raised its target  rate by 25 basis points and announced a "conditional pause" in its policy tightening. The summary reads like a much-expanded version of the press release issued on the day of the meeting, but does serve to underline the fact that the decisions that were announced were by no means a foregone conclusion. We also now have a better idea of what it might take to convince the Bank that the pause was a mistake. 

Here are a few key quotes, with commentary:

• Members agreed that momentum in inflation is turning a corner, with three-month annualized rates of inflation below the year-over-year rates for both total CPI inflation and, to a lesser extent, core measures of inflation. Hallelujah!  This is just about the first time that the Bank has focused its (and our) attention on the behaviour of inflation in recent months, rather than continuing to obsess over the very dated year-on-year number. It would be helpful if this remains the Bank's way of presenting the inflation data in the months ahead; the "base effect" will take some time to work itself out, meaning that the year-on-year rate will remain misleading until about mid-year. 
• The past few months of data ....made it clear that the tightness in the labour market persisted..... Overall, Council concluded that wage momentum was plateauing in the range of 4% to 5%. Persistent wage growth in this range was not viewed as consistent with achieving the 2% inflation target unless productivity increases to well above its historical trend. There are plenty of points that can be made here. The fact that wage gains are plateauing even as labour market conditions remain tight seems like a convincing refutation of the Phillips curve approach that the Bank (and its counterparts around the world) have been allowing to drive their policy approach.  As for the productivity outlook, it is at least arguable that historic trends may not provide much guidance in the unprecedented times we currently face. However, given Canada's abysmal productivity record, the Bank's caution is perhaps warranted. 
• Finally, while several factors were combining to bring overall inflation down, Council discussed the risk of it becoming stuck materially above the 2% target. Persistence in supply chain challenges, services price inflation, wage growth and inflation expectations could all keep inflation above the target. A rebound in oil prices could also push inflation back up again. This passage sums up the risk factors that could persuade the Bank to end its "conditional pause' and resume its tightening course. The Bank's base case sees inflation falling to 3 percent by mid-2023 and to the 2 percent target by 2024, but the listed factors are the most obvious threats to this favourable outcome. 

Release of these summaries will presumably become a regular feature of the Bank's communications strategy going forward. That can only be a good thing.