Bank of England governor Mark Carney has warned that sterling’s slump following the EU referendum will cause an inflation rise on some products, starting with food.
Carney said grocery prices would be the first to increase, with goods and services experiencing higher inflation over the next “few years”.
While Carney made it clear that sterling’s fall “helps the economy adjust”, he said it was “going to get difficult as we move from no inflation to some inflation”.
Speaking at a public round table with charities and other organisations in Nottingham, Carney said: “We are not indifferent to [the value of sterling], it matters to the conduct of monetary policy.”
He said the Bank had to “weigh increased inflation against supporting the economy” with low interest rates.
Following his comments, the pound recovered most of the day’s losses against the dollar, the BBC reported.
Earlier this week, the British Retail Consortium (BRC) said shop price rises caused by sterling’s slump are likely to be “focused” in the first half of next year.
BRC chairman Richard Baker said it would “not be possible” for retailers to absorb increased costs from the fall in the pound indefinitely.