Warning over economic slowdown

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The economic downturn is as bad as the 1970s and could "drag on for some considerable time", Charles Bean, the Bank of England's new deputy governor, told a conference of central bankers in the US.

His warning came amid reports that the International Monetary Fund (IMF) organisation has scaled back forecasts for global growth made just a month ago. The IMF is predicting world growth of 3.9% in 2008, compared to the 4.1% estimated in its July World Economic Outlook. It also forecasts growth next year of 3.7% instead of 3.9%, according to Reuters.

The IMF, which declined to comment on the numbers, will publish its next official forecasts in October.

Mr Bean - speaking at the bankers' conference in Jackson Hole, Wyoming - said that when financial markets began to look better "another grenade" exploded.

But, according to the BBC, he believes there is some light at the end of the tunnel and if oil prices and credit markets can be stabilised, growth should pick up and inflation fall next year.

Inflation is currently running 4.4% - more than double official targets - and is set to peak above 5% driven by surging food, fuel and energy costs.

Mr Bean said: "We've got our fingers crossed that things will improve. But there is the recognition that there is still a long way to go yet. It looks like it will drag on for some considerable time further yet.

"This is just a transitory period of subdued growth and we will get through the other side and the growth will resume to more normal levels."

Mr Bean's warnings came after official figures showed the UK economy grinding to a halt between April and June - ending a run of 63 consecutive quarters of economic advance. He described the mood at the conference as one of "considerable caution for the next year".