Financial Downturn 'To Drag On': BoE Official

Source : The Business Times, August 25, 2008

LONDON - The Bank of England's new deputy governor warned on Monday that the global financial slowdown could 'drag on for some considerable time'.

Charles Bean said that every time the markets began to look like they were becoming steadier, 'another grenade' exploded.

He said the downturn was at least as bad as in the 1970s, but predicted growth would pick up and inflation fall next year, provided oil prices and credit markets stabilised.

Mr Bean described the crisis as a 'transitory period' that would pass.

The deputy governor, speaking to the BBC from the annual conference of the world's top central bankers in Jackson Hole, Wyoming, said bankers attending last year's event believed the crisis would have been over by the end of 2007.

In fact, it had carried on for a year and every time the markets appeared to be stabilising, fears over the credit crunch tossed 'another grenade' into financial institutions.

He said the mood at the conference was one of 'considerable caution for the next year'.

'It looks like it will drag on for some considerable time further yet,' he 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.'

Mr Bean said it would be 'foolish to believe' a global financial downturn could be prevented from happening again, but he said regulation could be improved to 'reduce problems when they occur'.

Mr Bean, who took over as deputy governor this year, also warned against reading too much into the latest British quarterly growth figures, which showed the economy at a standstill.

The Office for National Statistics figures, released this month, showed no growth from the first quarter of 2008.

The deputy governor said he was hopeful that growth would revive next year and that inflation would fall.

The most important message, he said, was that the crisis would eventually end.

'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,' he said. -- AFP