BoC minutes:  Members concluded that recent data pointed in the right direction

The Bank of Canada released the Summary of Deliberations of the December 6 meeting when they delivered a "dovish" hold. According to the document, the Governing Council agreed that the likelihood of monetary policy being sufficiently restrictive had increased.

The minutes showed that the Governing Council acknowledged that monetary policy could not solve the structural shortage of supply in the housing sector. They expressed concerns that shelter inflation could remain elevated, making it difficult for inflation to return to the 2% target. 

After the release of the document, the Canadian Dollar weakened, with USD/CAD trading at its lowest level since early August, slightly above 1.3300.

Key takeaways from the BoC minutes: 

Governing Council members also expressed concern that shelter price inflation could remain elevated and that this could make it more difficult to return inflation to 2%. 

Governing Council agreed to maintain the policy rate at 5%. Past monetary policy actions had cooled the economy and continued to relieve price pressures.

As they did at the previous meeting in October, members reflected on whether monetary policy was sufficiently restrictive to restore price stability. 

They noted that recent data, including in the National Accounts, the Labour Force Survey and the October CPI, indicated that monetary policy was working as expected to slow economic activity and ease inflationary pressures. However, inflation remained too high, and they needed to see a further and sustained decline in core inflation.

Members agreed that the likelihood that monetary policy was sufficiently restrictive to achieve the inflation target had increased. But they also agreed that risks to the inflation outlook remained, and it may still be necessary to increase the policy rate to secure further disinflation and restore price stability.