Bank of England warns Brexit vote will damage living standards

Bank of England hints interest rates may increase sooner than markets think but warns of near-term squeeze on consumers

The Bank of England has warned households that living standards will fall this year as the effect of the Brexit vote works its way through to higher prices and meagre pay deals.

Presenting a sober assessment of the economic outlook just weeks before the general election on 8 June, the Bank's governor Mark Carney predicted living standards could start to recover in 2018 but , in the meantime, inflation would be higher than pay growth this year making it a "more challenging time" for households.

Related: Brexit slowdown fears as industrial output falls and trade deficit grows