The UK economy has been plunged into turmoil following Kwasi Kwarteng's disastrous mini-budget. Sterling fell to an all-time low against the dollar and the Bank of England was forced to intervene to prevent pension funds from collapsing as investors dumped UK bonds.
A weak pound reduces our buying power on imported goods. It means everything from petrol to food becomes more expensive, as firms pass their price hikes on to customers. It also makes foreign travel more expensive, as you get less for your money abroad.
So, continued declines in the value of the pound threaten to worsen inflation, exacerbating the worst cost-of-living crisis in decades. As this week progressed, the pound clawed back losses. But there remains considerable uncertainty in the air, in the wake of markets' terrible reaction to the government's plans for debt-fuelled tax cuts.
