Economic Review

The UK consumer price index fell to 2.7 percent in January following an 11 year high of 3 percent in December. These high inflation rates have seen the bank of England raise interest rates three times since august in an attempt to reduce inflation to just 2 percent. The fall in inflation was mostly attributed to lower transport costs, but most analysts predict another rise in inflation soon. Inflation in the UK has been above the government set target of 2 percent for nine consecutive months now. Another interest rate rise seems to be quite possible, but many analysts believe that if raised to 5.5 percent, there will be no further rises for a substantial time.

January saw an incredible trade surplus increase of 67 percent on last January’s trade surplus for China. Last month China had a trade surplus of 15.9 billion dollars compared to 9.5 billion dollars in January the previous year. Total trade surplus for China in 2006 reached a record 177.37 billion dollars, an increase of 74 percent from 2005. China does not allow its currency to be traded as freely as would be hoped, which undervalues it. The low value of the yuan has been blamed for the cheap and therefore high exports of China by the west.