In the first paragraph of the press release, the Committee summarizes its reasons:
Recent data have been strong, inflation is close to target, and the economy is operating roughly at capacity.This might seem like a justification for doing nothing. The Bank has achieved its goals, so no action is warranted. This only makes sense if Bank people are forecasting that an economy operating "roughly at capacity" will wake up the Phillips curve and cause more inflation, which they think they should tamp down with higher interest rates - now, not when the inflation happens.
But, further on in the press release is this:
Recent data show that labour market slack is being absorbed more quickly than anticipated.That seems inconsistent with the quote above. How can the economy be operating "roughly at capacity," with labor market slack? I'm running roughly as fast as I can, but I continue to run faster!
Finally, the forward guidance hasn't changed:
While the economic outlook is expected to warrant higher interest rates over time, some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential and inflation on target.Still no clarification as to why these higher interest rates should be warranted, and under what conditions rates will or will not rise in the future. And why is the current policy seen as "accommodative?" Short-term nominal interest rates may be unusually low, but it's generally accepted that the real effects of monetary policy actions dissipate over time. So, the real effects of monetary policy we should be seeing now are the effects of interest rate hikes last year. Certainly that's not accommodative. In terms of the effects on inflation of interest rate increases, again I think the Bank of Canada has the sign wrong - though they have good company in that belief. Inflation control is about moving the central bank's nominal interest rate target in the direction you want inflation to go. That's what the weight of theory and empirical evidence tells us.