Bank governor Mark Carney: 'Things are going to get difficult'

Bank of England Governor Mark Carney says that "it is going to get difficult" for those on low incomes as inflation rises.

Mr Carney was speaking during a tour of the Midlands and warned that inflation would rise amid currency changes following the EU referendum.

Inflation is currently standing at 0.6%, well below 2%, but it is expected to rise sharply thanks to economic upheaval in the wake of Britain's vote to leave the EU. It could bypass target levels by early next year.

"We're willing to tolerate a bit of an overshoot in inflation over the course of the next few years in order to avoid (rising unemployment), to cushion the blow and make sure the economy can adjust as well as possible," Mr Carney said.

But any inflation rises will not be good news for those on low incomes, as the price of goods and services increase.

Carney said food was likely to be the first affected, admitting that the situation was "going to get difficult [for those on the lowest incomes] as we move from no inflation to some inflation".

In fact, the grocery industry has already been impacted by the plummeting value of the pound.

Product supplier Unilever (NYSE: UL - news) and supermarket chain Tesco (Frankfurt: 852647 - news) were embroiled in a row earlier this week after Unilever attempted to raise its wholesale prices by 10% to compensate for the currency volatility.

Tesco responded by pulling Unilever products from sale, before talks between the two resolved the situation on Thursday.

Mr Carney said he was not indifferent to the recent falls in sterling, but said the ongoing market volatility would 'help the economy adjust'.

The pound recovered its losses against the dollar from earlier in the day as the markets responded positively to Carney's comments, with the Euro value also dropping to below 90 pence.

Sterling value has now dropped almost 20% since the referendum result was announced in June, causing difficulties for businesses across the country.

The Bank of England reduced interest rates to a record low in August in order to help the economy weather the storm.

It has previously signaled that it is willing to reduce levels further if necessary to avoid the UK slipping back into recession.