The current economic slowdown is likely to "drag on for some considerable time", the Deputy Governor of the Bank of England, Charles Bean, has warned.

Speaking to the BBC from the annual conference of the world's leading central bankers in Jackson Hole, Wyoming, Mr Bean said: "Last year this was a financial crisis that we thought with a bit of luck would be over by the time of Christmas, but it has dragged on for a year and looks like it will drag on for some considerable time further yet."

Mr Bean, who was appointed Deputy Governor of the Bank in June following the surprise resignation of Sir John Gieve, said the world's central bankers faced the biggest financial challenge of the past 40 years.

“It’s fair to say that if you look at the shocks impinging on us this is at least as challenging a time as back in the 1970s.”

“Some people have said it’s as big a financial shock as the Great Depression and as far as the oil shock goes the rise in oil prices is in the same order of magnitude that we had to deal in the 1970s,” he said.

Mr Bean said the mood among central bankers was one of "financial caution", after a year of volatility which has seen high-profile bailouts of the investment bank Bear Stearns in the US and Northern Rock in the UK, and in which thousands of jobs in the financial services sector have been lost.

“There are periods when markets look like they are getting better. Then another grenade explodes, another bout of fear of sustainability of some financial institutions, maybe intervention by the authorities," he said.

Fears about the health of the British economy have gained intensity in recent weeks: inflation hit a record 4.4 per cent earlier this month, and last week official figures showed growth in the UK slowed to a standstill in the first quarter of 2008. But Mr Bean urged people not to place too much emphasis on the latest growth figures, and to realise that this is "just a transitory period" of subdued growth.

He acknowledged that the UK faced "a tricky period", with real household income at very low levels likely to lead to "difficult social issues", but he was still hopeful for a return to steady growth in the coming months.

"On the assumption commodity prices remain stable and if anything fall back, then inflation should drop back as we go through next year."

He added: "One would hope that the conditions in credit markets should gradually start to improve and those two factors will help to ensure growth will start to pick up as we go through next year."

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