The UK's inflationary pressure could be worse than previously feared and further interest rate rises could be needed to curb the issue, the Bank of England's (BoE) chief economist Huw Pill has said.
Pill also warned of "substantial" price pressures, in a speech to the Association of Chartered Certified Accountants in Wales on Friday.
He explained the dilemma the central bank faces as surging inflation threatens to become immersed in domestic price setting and restrict economic growth by squeezing household incomes.
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"These are difficult times for many people, especially for the less well off, who spend a higher proportion of their income on energy and food, where recent price rises have been most significant," he said.
"Current challenges are thus a salutary reminder of the importance of price stability as an anchor for wider economic stability, and a bulwark to sustaining people’s livelihoods, especially for those on lower pay and fixed incomes."
Britain's inflation rate is currently running at five times Threadneedle Street's 2% target after CPI inflation hit a 40-year high of 9% in April.
It is set to jump as high as 10% by the end of the year, with the BoE warning this could tip the economy into recession.
Pill warned inflation is now the biggest challenge in 25 years since the central bank was given responsibility for setting interest rates in 1997.
The chief economist echoed governor Andrew Bailey’s observation that the BoE faces "its biggest challenge in over the past quarter of a century". After years of negligible inflationary threats, "monetary policy is undergoing a transition," he said.
Despite deciding to move in cautious steps, Pill, who was one of the nine-member Monetary Policy Committee who voted for a 25bps lift in May, said more rate rises will be necessary.
"We still have some way to go in our monetary policy tightening, in order to make the return of inflation to target secure," he said. "Acting to achieve the 2% inflation target is now more important than ever."
It came as the MPC hiked rates to a 13-year high of 1% this month, its fourth rise in a row from a historic low of 0.10% in March 2020. Analysts expect rates could be raised as high as 3% by this time next year.
Britain's rates are now at their highest level since February 2009, when they were hiked during the recession that was caused by the 2008 financial crisis.
He concluded: "With inflation forecast to rise into double digits following the very sharp rise in international energy and goods prices, this is biggest challenge the MPC has faced over the past quarter of a century.
"It is in these testing times that the anchor represented by the 2% inflation target comes to the fore. Supported by the independence accorded to the MPC to pursue that target, we are able to take the sometimes tough decisions to bring inflation back to 2% and keep it there sustainably.
"It is that commitment that has led me to support a tightening of monetary policy since I joined the committee last September, and to signal today that this tightening still has further to run."
It came as former BoE governor Mervyn King accused global central banks of not having a clear plan of how to get inflation back down to 2% from the current 40-year high.
King criticised his former employer, saying it must take some responsibility for the current cost of living crisis, accusing the BoE of fuelling a rise in inflation by printing too much money during the pandemic.
He said that "considerable" interest rate rises were now needed, warning Britons to brace themselves for a "very unpleasant period" ahead.