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Britain’s economy grows modestly in first quarter

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STACEY VANEK SMITH: Later today Federal Reserve Chief Ben Bernanke will hold a news conference on its plans for the U.S. economy. Meanwhile, Britain’s Gross Domestic Product is out this morning. That’s a measure of all of the goods and services a country produces. It’s considered to be the economic indicator.

Christopher Werth joins us now from London. Good morning, Christopher.


SMITH: So tell us — what economic news did the British wake up to this morning?

WERTH: Well, it’s a good news/bad news kind of day. The good news is that the country’s gross domestic product grew, as opposed to shrinking, which is what it did at the end of last year. The bad news is the country’s economic output didn’t grow by much, just a half of a percent, which means the British economy is just of kind treading water.

SMITH: Is this kind of a canary in the coal mine situation for the U.S.? I mean should Americans be worried the same thing will happen here?

WERTH: I put that question to Graham Turner at GFC Economics here in London. He says drastic British budget cuts in Britain — similar to some of the budget proposals in Washington — are partly to blame for the British slowdown. But he says the Bank of England has kept interest rates low and that’s prevented further declines. He says the same can be said for the U.S., where interest rates are also near record lows.

GRAHAM TURNER: The message from the U.K. is that we’ve got to err on the side of caution. And the economy is very vulnerable. It shows that you’ve got to keep monetary policy loose. If you don’t you’re going to have a great slowdown.

And, Stacey, it’s not just Americans and U.S. bankers that are watching the Fed’s decision today. Markets and governments around the world are on edge too particularly because what the Fed says can have a ripple effect around the globe.

SMITH: Alright, Christopher Werth in London. Thank you Christopher.

WERTH: Thanks.

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