Bank of Canada could cut rates before the end of 2023: economist

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“The language is important because it creates expectations, and in inflation there’s a very large dimension that is psychological,” Gosselin explained. “If you believe that prices will go up, you make prices go up by asking for increased wages, you [may be] willing to pay more for your house, because you believe things will go up. So it’s kind of self-fulfilling.

“Obviously, when the Fed has strong language saying that they will not budge, they’re basically sending a signal. I think this is a bit of lip service.”

Could surging oil prices prove problematic?

Another potential curveball is a recent spike in oil prices after the unexpected announcement last week that Saudi Arabia and other OPEC producers planned to reduce the amount of crude they send out monthly.

“That’s something that surprised a lot of people including myself,” Gosselin said. “Obviously energy is the lifeblood of the economy, and so if your energy prices go up, trucks have to pay more, so the food is more expensive and everything’s more expensive.

“So that’s going to be the wildcard. I don’t know where oil prices are going to go this year, and should they go up further, [that could put] pressure on prices and generating inflation. That could be a gamechanger, but it’s very difficult to forecast at this point.”

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