A National Bank of Canada economist is warning that the surge in inflation through the start of the year is poised to take a greater toll on household balance sheets than the Bank of Canada’s decision to raise rates off the effective lower bound.

In a note to clients, National Bank Deputy Chief Economist Matthieu Arseneau said the pain at gas pumps and in the produce aisle could have the impact of the equivalent of three 25 basis point hikes from Canada’s central bank.

“Consumers, meanwhile, have been rapidly losing purchasing power since the start of the year, notably through their energy bills,” he said.

“By our calculation, the effect on households of food and gasoline price rises in H1 2022 could be equivalent to the impact of a 78-basis-point hike in the Bank of Canada policy rate on debt service cost.”

Arseneau said a 25 basis point hike raises debt servicing costs by about $3.5 billion, about one-third as much price pressure as the recent increases in food and fuel costs in Canada.

Inflation rose 5.7 per cent year-over-year in February, the fastest pace of price increases since 1991, led by a 32.3 per cent surge in gas prices.