Britain is facing a unique inflation shock with price pressures coming from every angle, according to former Bank of England (BOE) rate-setter Kristin Forbes.
Speaking to MPs on the Treasury Committee on Wednesday (May 11), Forbes, also former member of the White House's Council of Economic Advisers, said the UK alone among major economies was facing inflationary pressures from all 6 of the key sources she follows.
"The UK hits every box, they have inflationary pressure coming from all 6 areas - other economies don't have that," said Forbes, now professor of management and global economics at MIT's Sloan School of Management.
"Bottom line, put it all together and you see why this is a particularly difficult challenge for the UK and why inflation could hit 10 per cent. It is unlikely to hit those numbers elsewhere."
Forbes said the UK had come into the crisis with a history of higher inflation than the US and euro area, making firms more likely to be quicker to adjust prices. Medium- and long-term term expectations are also higher in Britain than elsewhere and "quite a bit uncomfortably above where you would like to see them".
"Sterling has been weaker than other currencies, especially the dollar," she said. The other 3 sources are not unique to the UK.
The comments add to the growing number of commentators warning that Britain is facing a worse inflation shock than any other leading economy.
The International Monetary Fund said the world's fifth largest economy is being buffeted by the worst of the US and the worst of the euro area impacts. Andy Haldane, the former BOE chief economist, said high inflation could remain until 2024.
Forbes, who served at the BOE from 2014 to 2017, said she would support aggressive policy if she was on the committee today, including "a 50 basis point increase in a meeting or 2 if growth and the labour market hold up".
Raising rates aggressively was the best chance of avoiding a recession, she said. If the BOE overshoots, it can cut rates back.