Millions of households were last night warned to brace themselves for soaring inflation triggered by the plunging pound.
It also fell over 0.5% to around 1.103 against the euro.
Around 5% has been wiped off the pound in the past four days and a massive 18% since June’s bombshell Brexit vote.
The fall is already hitting the average family through higher fuel prices and dearer holidays abroad.
But experts say that is nothing compared to a wave of price rises on the way.
Soaring import costs are set to lead to price hikes for everything from gas and electricity to food, clothes and toys.
The Government’s preferred measure of inflation – the Consumer Prices Index – currently stands at 0.6%.
But Samuel Tombs, of Pantheon Macroeconomics, yesterday predicted it would more than double to 1.5% by December, then leap to 3% by next June.
His forecast is based on the pound/dollar exchange rate remaining roughly where it is now.
However, should it fall to $1.10 then he warned CPI could surge to 4% in 2018.
Soaring inflation means the Bank of England risks overshooting its 2% target for CPI.
However, wage growth will be a key factor in the months ahead. As long as wages are rising faster than inflation, workers are still better off, on paper at least.
Mr Tombs predicted gas and electricity prices will be among the next to rise as the weak pound pushes up wholesale costs.
He said: “We expect consumer energy bills to rise by an average of 2% in December, and expect suppliers to announce price hikes over the next month.”
Companies have lined-up over recent weeks to warn rising import and other costs threaten price rises for customers.
Fashion and homewares chain Next last month predicted price rises of up to 5% next year as it was forced to pass on the hit.
Budget airline easyJet is set to post its first fall in profits for seven years, partly because of a £90million currency bill as it buys fuel in dollars and pays local airport fees in euros.
And one of the UK’s biggest toy chain, The Entertainer, recently predicted prices would jump by 7% and 10% next year.
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Meanwhile Brian Madderson, chairman of the Petrol Retailers Association, said: “Motorists can expect increases of up to 4p or 5p per litre by the end of the month unless there are favourable corrections to the exchange rate and to global oil prices. This will also increase UK inflation.”
Sterling fell from $1.48 to $1.32 against the US dollar in the aftermath of the Brexit vote.
It levelled off but has tumbled since the Tory conference, when Prime Minister Theresa May renewed concerns about a “hard Brexit .”
Investors are spooked about what will happen to the UK economy if the country makes a clean break from the EU, with no tariff-free access to the single market and restrictions of labour.
At the same time, the dollar is strengthening amid hopes that US Presidential hopeful Hillary Clinton will beat Donald Trump in next month’s race for the White House.
Kathleen Brooks, research director at City Index, said: “The weakness in the pound is really a sign that investors don’t have confidence in a post- Brexit UK economic outlook.
“They think Brexit is going to be very negative for the UK economy.”
Brexit supporters are likely to seize on warnings before the referendum that the economy would suffer an immediate slump.
In fact, the UK has outperformed many of the other major economies.
Former Bank of England Governor Lord King also waded into the debate this week, telling Sky News he thought the fall in the pound was a “welcome change”.
He added: “The whole thing has generated reactions which are over the top.”
But others fear that the real impact will come after next March, when the Government invokes Article 50 , triggering the formal two years Brexit process.
While the pound has slumped, share prices have soared.
The FTSE 100 reached a record high on Monday because the weak pound boosts firms’ overseas profits when they are converted back into sterling.
The index is made up of mainly multi-nationals, some with very substantial overseas operations.