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WOLFSBURG – Volkswagen Chief Executive Officer Martin Winterkorn resigned Wednesday over a pollution cheating scandal that has sparked a US criminal investigation and worldwide legal action with unfathomable financial consequences for the auto giant.

"I am shocked by the events of the past few days. Above all, I am stunned that misconduct on such a scale was possible in the Volkswagen Group," Winterkorn said in a statement issued by the carmaker.

"Volkswagen needs a fresh start — also in terms of personnel. I am clearing the way for this fresh start with my resignation."

The stock market barely flinched at the news.

Following a two-day free fall that had axed 35 per cent — or 25 billion euros ($28 billion) — off the company's market value on Monday and Tuesday, the shares had bounced back on Wednesday and were showing a gain of 5.94 per cent at 112.30 euros after Winterkorn's announcement. 

Even if the haemorrhage on the markets may have abated, Volkswagen, the world's largest auto manufacturer by sales in the first half of this year, still faces a growing tangle of legal threats after it admitted that as many as 11 million of its diesel cars worldwide are equipped with software capable of fooling official pollution tests.

In addition to investigations from France to South Korea, public prosecutors in Germany also said they were examining information and evaluating legal suits already filed against the company by a number of private individuals to decide whether to launch a full criminal inquiry against those responsible at VW.

Winterkorn 'takes responsiblity' 

A day after Winterkorn had offered his "deepest apologies", the 68-year-old said he accepted his "responsibility for the irregularities that have been found in diesel engines".

But he also insisted: "I am not aware of any wrongdoing on my part."

His widely predicted departure came after a meeting of the supervisory board's six-member steering committee in Wolfsburg. 

A new chief executive is to be named Friday, and other personnel changes were expected, the board said.

According to the US authorities, VW has admitted that it equipped about 482,000 cars in the United States with sophisticated software that covertly turns off pollution controls when the car is being driven.

It turns them on only when it detects that the vehicle is undergoing an emissions test.

With the so-called "defeat device" deactivated, the car can spew pollutant gases into the air, including nitrogen oxide in amounts as much as 40 times higher than emissions standards, said the US Environmental Protection Agency (EPA).

The EPA, which announced the allegations Friday along with California state authorities, is conducting an investigation that could lead to fines amounting to a maximum of more than $18 billion.

The US Department of Justice has also launched a criminal inquiry led by its environment and natural resources division, a source told AFP, speaking on condition of anonymity.

The California Air Resources Board, too, is investigating Volkswagen's pollution violations.

New York Attorney General Eric Schneiderman said he had launched his own probe of Volkswagen and would work on it with prosecutors from other states across the United States.

Billions in provisions 

Private law firms are lining up to take on the German company, with a class action suit already being filed by a Seattle law firm.

VW has halted all diesel vehicles sales in the United States during the investigations.

The scale of the exposed deception expanded dramatically Tuesday when Volkswagen said that as many as 11 million diesel vehicles worldwide may have the same "anomalies".

The full impact on the reputation of Volkswagen, whose parent company also owns brands including Audi, Skoda and Lamborghini, is hard to measure. 

The scandal has already hit the share price of other carmakers, buffeting international stock markets.

Volkswagen has set aside 6.5 billion euros in provisions for the third quarter to cover the potential costs of the revelations. 

While the scandal has been restricted to Volkswagen so far, environmental protection groups, particularly in Germany, suspect other carmakers may be using similar technology. 

The European carmakers' association ACEA said that while it recognised the gravity of the affair, "there is no evidence to suggest that it's a problem across the whole industry." 

And the German carmakers' federation VDA insisted that diesel engine technology itself was not in question. 

'Screwed up' 

But the EPA has said it will screen for defeat devices in other manufacturers' diesel vehicles now on the road, although it declined to identify which brands would be tested.

German Transport Minister Alexander Dobrindt said a special commission of inquiry had travelled to VW's headquarters on Wednesday. 

France, Britain and other nations have called for a Europe-wide investigation. 

South Korean officials summoned VW representatives for explanations on Tuesday, saying tests would be started by "no later than next month".

The United Nations has described the revelations as "extremely troubling”.

The German company is likely to face tough questioning in the US House of Representatives' energy and commerce committee, which announced plans for a hearing in the coming weeks.

HONG KONG — Weaker growth in China this year is expected to cause a slowdown in the rest of Asia, the Asian Development Bank (ADB) said Tuesday, as it became the latest major body to revise down its forecasts for the world's number two economy.

It also warned central banks to prepare for an expected Federal Reserve interest rate rise, with many nations already seeing huge capital outflows as dealers look for better, safer US investments.

The report comes as markets are swiped by extreme volatility driven by fears over the Chinese economy, and its leaders' management of it, after last month's surprise devaluation of its yuan currency.

"The combination of a moderating prospect in China and India, together with delayed recovery of advanced countries, weighed on our forecast for the region as a whole," said ADB Chief Economist Shang-Jin Wei, who presented the report at the Foreign Correspondents' Club in Hong Kong.

In an update to its flagship Asian Development Outlook released in March, the bank said growth in the region would hit 5.8 per cent this year and 6 per cent in 2016. March's forecast was for 6.3 per cent for both years.

Inflation in the developing Asia region was forecast to ease further, partly due to lower global commodity prices.

Wei said the overall outlook for the region was "still positive" but had been impacted by capital flow reversals and weakened commodity prices for exporters, partly related to the China slowdown.

"Developing Asia is expected to continue to be the largest contributing region to global growth despite the moderation," he added.

However, it tipped China, the main driver of global economic growth, to expand 6.8 per cent this year, instead of the 7.2 per cent previously estimated, following a stream of weak indicators including on trade, inflation, investment and consumer spending.

US rate worries 

The ADB predicted growth rate would be the slowest since 1990, a year after the Tiananmen Square crackdown that led to global sanctions against Beijing. It is also below China's official target for the year of "about" 7 per cent.

It said Southeast Asia was bearing the brunt of China's slowdown, with growth in Southeast Asia this year put at 4.4 per cent, before bouncing back to 4.9 per cent in 2016.

Jurgen Conrad, head of the ADB's economic unit, told reporters in Beijing that the revision was "mainly due to the delayed recovery in industrial countries reducing export demand".

Last week the OECD cut its 2015 growth forecast for China by 0.1 percentage points to 6.7 per cent.

Forecasts for India were also lowered to 7.4 per cent from 7.8 per cent, weighed by the slow pace of reform by the new government and weak external demand, the report said.

The ADB urged regional central banks to move now on monetary policy to prepare for a US rate hike, which Federal Reserve (Fed) chief Janet Yellen has said will come before the end of the year.

"To counter the impacts of a US rate rise, monetary policy authorities in developing Asia will need to find a balance between stabilising the financial sector and stimulating domestic demand," the report warned.

A tightening of US monetary policy would likely flight of much-needed capital from developing nations as traders move into the United States in search of better returns.

This would in turn put pressure on central banks to lift rates themselves in a bid to protect their currencies, at a time when they are struggling to kickstart tepid growth at home.

World markets were rocked after the Fed on Thursday held off announcing a rise, with Yellen citing the threats to the US economy caused by China's economy as a key reason for the decision.

BERLIN — Until last Friday, the mighty Volkswagen (VW) brand symbolised German engineering prowess and reliability.

In just four days, that has changed radically. A scandal over cheating on US diesel emission tests has engulfed the company and many Germans worry it will have a domino effect on their businesses, eroding the cherished “Made in Germany” label.

Following a series of other blows to Germany's reputation, from repeated delays in Berlin's new airport to a string of financial misdeeds at flagship lender Deutsche Bank, Germany's business image looks tainted.

"Made in Germany is quality and trust. Now that trust is lost," said Ferdinand Dudenhoeffer of the University of Duisburg-Essen. "No one could have imagined the scale of this and the damage it will cause for German industry will go on and on. This is just the tip of the iceberg."

Top-selling Bild daily described VW as the crown jewels of German industry and said its success must not be gambled away.

The reality, however, is that VW has been caught deliberately misleading the US environmental watchdog and US consumers over emissions from its diesel engines.

Its shares have tumbled 33 per cent in the last two days. Earlier on Tuesday, the Wolfsburg-based firm said it would set aside some 6.5 billion euros in provisions this quarter to cover costs related to the scandal. Media are reporting that Chief Executive Martin Winterkorn will go.

The impact of such a scandal is especially great in Germany, Europe's biggest economy, because of its reliance on exports which make up more than 45 per cent of the gross domestic product.

"The great success of the export nation of Germany rests on the quality label 'Made in Germany'," said Marcel Fratzscher, head of the DIW economic institute in Berlin. "VW stands for this German quality — for perfection, reliability and trust."

"Even if we don't know how much the VW case will affect the German economy, the risk is high due to a reliance on exports," he added.

Germany's auto industry accounts for roughly one in five jobs. It accounted for 17.9 per cent of Germany's 1.1 trillion euros in exported goods last year, according to Deutsche Bank, and has enjoyed above-average export growth since 2009.

German Economy Minister Sigmar Gabriel has also expressed concern about the reputation of the car industry overall, although VW rivals Daimler and BMW were quick to say the accusations against VW do not apply to them.

Wealthy brands

According to brand consultancy Interbrand, VW is worth 10 billion euros and is one of the most valuable German brands.

The top 50 German brands are worth more than 170 billion euros, says Interbrand, and carmakers dominate the top ranking, with Mercedes-Benz, BMW, Volkswagen and Audi taking first, second, fifth and sixth position respectively.

Highlighting the public relations battle it faces, German television has been showing a frequently aired US television commercial in which VW not only boasts that it is the top diesel car brand in America, but also asks: "Isn't it time for German engineering?"

The scandal undermines VW's whole push into clean diesel which has been the pillar of its efforts to develop environmentally friendly technology, a strategy shared by other German carmakers BMW and Daimler.

Volkswagen's US chief Michael Horn said the company had "totally screwed up" and promised to make amends.

Part-owned by the state of Lower Saxony, VW has shaken off a 2005 corruption scandal involving prostitutes and luxury trips for members of the company's works council. Earlier this year it overtook Toyota as the world's biggest carmaker by sales.

Its path, from its creation in 1937 when it was tasked with  building an affordable "people's car" in Hitler's Germany, came to epitomise the country's post-war regeneration thanks to models from the Beetle to the ubiquitous Golf and Passat.

Politicians frequently fete its expansion into the United States and China as contributing to Germany's export strength.

Some experts say VW now needs to apply a strategy like Mercedes did after the 1997 “elk test” when a Swedish motor magazine found Mercedes' new A Class tended to flip over when undergoing an evasive manoeuvre test.

Mercedes responded by recalling the cars and adding new safety features but it took time for the brand to recover.

Dirtier image

Yet, this scandal is different to the "elk test" and other car recalls as it exposes not incompetence but a deliberate attempt to mislead.

After a spate of scandals at German firms and organisations, it is starting to look as if malpractice is not limited to a handful of isolated cases, although Germany is no laggard in international rankings.

Corruption watchdog Transparency International gives VW a relatively high score of 5.5 out of 10 in its ranking of global corporate transparency, a score that put it just outside the top 10 companies.

But Germany's image is getting dirtier.

Last year, ADAC, Europe's largest car club, was found to have falsified the results of its coveted annual car award, which had gone to VW's Golf. The order of results had not been tampered with, said ADAC, only the total number of votes but it still caused an uproar in Germany and in the auto world.

Such practices are not confined to the auto industry, which has in the last few years been criticised for wielding its economic clout to exert influence in Berlin and Brussels, for example over European Union (EU) green legislation.

Engineering giant Siemens has sought to recover damages from 11 top managers and supervisory board members for failing to stop illegal practices and bribery that forced it to pay more than $1.3 billion to settle corruption probes in the United States and Germany in 2008.

The German auto giant revealed Tuesday that 11 million diesel cars worldwide are equipped with devices that can cheat pollution tests, a dramatic expansion of a scandal that immediately sent its shares plummeting by another 20 per cent.

Authorities from France to South Korea to the United States announced investigations and threatened legal action, prompting Volkswagen to announce that it was setting aside 6.5 billion euros ($7.3 billion) in provisions for the third quarter to cover the potential costs of the scandal. 

VW shares, which dived 17 per cent on Monday, plunged by another 23 per cent to a low of 101.30 euros during trade on the Frankfurt Stock Exchange as the automaker's new revelations, including a warning that it will have to lower its profit outlook, sent investors fleeing.

"Further internal investigations have shown that the software concerned is also installed in other diesel vehicles," VW indicated in a statement. "Anomalies have shown up in around 11 million cars worldwide that are equipped with a specific engine type." 

"In order to cover the necessary service and other measures to win back customer confidence, VW plans to set aside 6.5 billion euros in provisions in the third quarter. The group's earnings targets for 2015 will be adjusted accordingly," he added  

The spiralling scandal has led to France calling for a Europe-wide probe into the revelations, South Korea summoning Volkswagen officials, and the US Justice Department reportedly launching a criminal investigation.

The scandal went public Friday when US regulators ordered Volkswagen, the world's largest automaker by sales, to fix the defect and said they were launching a probe.

The German firm halted all diesel vehicle sales in the United States during the US investigation, which could lead to fines of more than $18 billion.

The shockwave immediately hit stock markets, with VW shedding more than a quarter of their value — or more than 20 billion euros —  since last week.

Other automobile stocks were also dragged lower with Daimler shares down 7.03 per cent and BMW shedding 7.17 per cent on Tuesday. 

'Europe-wide probe?'

French Finance Minister Michel Sapin on Tuesday requested a Europe-wide probe, telling French radio that it seemed necessary to check cars manufactured by other European carmakers in order to reassure the public.

"This is not a minor subject, it's not about speed or the quality of leather," Sapin told Europe 1 radio station. "What we are dealing with is making sure people avoid being poisoned by pollution." 

South Korean officials summoned VW representatives for explanations on Tuesday. "We will start conducting tests no later than next month," said a senior official at the environment ministry.

In addition to the environmental probe already under way, the US Department of Justice has launched a criminal investigation, US officials told the Bloomberg news agency. The Justice Department and Volkswagen declined to comment on the report.

According to the US authorities, VW has admitted that it had equipped about 482,000 cars in the United States with sophisticated software that covertly turns off pollution controls when the car is being driven and turns them on only when it detects that the vehicle is undergoing an emissions test.

With the so-called "defeat device" deactivated, the car can spew pollutant gases into the air, including nitrogen oxide in amounts as much as 40 times higher than emissions standards, said the US Environmental Protection Agency (EPA), which announced the allegations Friday along with California authorities.

Blow to reputation 

"Using a defeat device in cars to evade clean air standards is illegal, and a threat to public health," said Cynthia Giles, enforcement officer at the EPA.

In Germany, the government has already launched an investigation into whether Volkswagen or other carmakers are doing anything similar in Germany or Europe.

The German daily Frankfurter Allgemeine Zeitung reported that the national supervisory authorities had alerted VW to discrepancies in the emissions data in May 2014 and some cars were even recalled.

Transport Minister Alexander Dobrindt told the Bild daily that he had asked Germany's Federal Motor Transport Authority "to immediately have specific and extensive tests conducted on all Volkswagen diesel models by independent experts".

Beyond the potential fines and lawsuits, the company faces a potentially crippling blow to its reputation.

So far the scandal has been restricted to Volkswagen.

But the EPA said Monday that it will screen for defeat devices in other manufacturers' diesel vehicles now on the road, though it declined to identify the automakers whose vehicles will be tested.

Environment protection groups, particularly in Germany, suspect other carmakers may be using similar technology. 

AMMAN — The total value of the Kingdom's imports during the first seven months of this year declined by 12.5 per cent, compared to the same period of last year, statistics showed Monday.

The decrease was attributed to the drop in the value of imported oil and its derivatives as well as steel. 

The value of the Kingdom's total exports also went down by 7 per cent to JD3.2 billion. 

The Department of Statistics (DoS) indicated that national exports dropped by 7.7 per cent by the end of July 2015 to JD2.7 billion.

Data showed an increase in the value of exported clothes and raw phosphate, and a decline in the value of exported fruit and vegetables, raw potash, pharmaceuticals and fertilisers.

As a result, the commercial balance deficit went down by 15.7 per cent in the January-July period of 2015, compared to the same period of the previous year.

Separately, Zarqa Chamber of Industry President Thabit Wirr said the value of the chamber's total exports during the eight months of the year reached $576 million, 1 per cent less than the same period of the previous year.

He indicated that the chamber, covering Zarqa and Mafraq governorates, issued a total of 9,012 certificates of origin during the first eight months of 2015.

Leather and embroideries sector topped the list of the chamber's exports, with a value of $342 million, followed by supply, food, agricultural and livestock at $77 million, and the engineering, electric and IT at $48 million.

Exports to the North American markets accounted for 56.5 per cent of the chamber's total exports with a value of $32 million, Wirr added.

AMMAN — Ras Al Khaimah Free Trade Zone will launch a promotional campaign in the Kingdom between October 11 and 15 to acquaint Jordanian investors with investment opportunities available in the zone to enhance commercial and investment cooperation between Jordan and the United Arab Emirates (UAE).

The campaign, headed by the zone's Chairman Ahmed Bin Saqr Al Qassimi, is aimed at having new investment relations between the two countries and reviewing available opportunities the zone offers.

The campaign also aims at increasing the number of Jordanian companies on its premises, which currently stands over 250 businesses. Rami Jallad, the zone's acting chief executive officer, noted that the trade exchange volume between Jordan and the UAE currently stands at 3 billion dirhams (around JD580 million).

AMMAN — The Romanian adviser for defence and security affairs on Monday said Romania’s Prime Minister Victor Ponta will be visiting Jordan at the beginning of October.

The adviser made his remarks during a meeting with Ghassan Khirfan, Jordan Chamber of Commerce first deputy president.

The Romanian adviser voiced his country's interest to enhance economic and commercial relations with Jordan. Expressing interest in business opportunities, especially in Aqaba.

Ponta will be accompanied by a "high-level" delegation from the public and private sectors, who will discuss several issues and proposals in order to develop bilateral relations and activate signed agreements, according to the adviser.

He also said the visit will include discussing several economic-related issues, particularly increasing Romania's imports of Jordanian fruit and vegetables as well as facilitating measures to issue visas for Jordanian businesspeople.

The adviser and Khirfan agreed to hold meetings between  Jordanian and Romanian businesspeople on the sidelines of Ponta's visit.

HONG KONG — De Beers, the world's largest diamond producer, said Monday the economic slowdown in China and a strong US dollar meant a "challenging" year for the industry, while India would be key to future growth.

Analysts have said global diamond prices could tumble due to a glut as consumer demand weakens.

De Beers announced in July that its underlying earnings had slumped 23 per cent in the first half of 2015 and revised down its production forecast.

"We expect 2015 as a whole to be a more challenging year," said Chief Executive Officer Philippe Mellier in the company's new "The Diamond Insight Report".

"The continued strengthening of the US dollar against all major currencies, coupled with a slowdown in economic growth in China, is likely to lead to global diamond jewellery demand for the full year being relatively flat compared with 2014 levels," the report indicated.

Diamonds are typically denominated in US dollars.

Mellier predicted strong growth would return "once the current stocks have worked through the system".

Turbulence in the Chinese economy saw the devaluation of the yuan and a stocks crash.

It came on the heels of an anti-corruption drive by Chinese President Xi Jinping which has dented the luxury market.

"The challenge in China is that we all got used to growing at exorbitant rates... the industry is having to re-adjust itself," Stephen Lussier, chief executive officer of De Beers' Forevermark jewellery brand, told AFP. 

But the company is still "bullish" about China's role in future, says Lussier, who is in Hong Kong for a jewellery and gem fair. 

China accounts for 16 per cent of global diamond sales, the second largest market after the United States on 42 per cent. India is third with 8 per cent. 

India expansion 

In 2014, the US was the fastest growing consumer market, with a 7 per cent increase in diamond consumption, according to the De Beers report. 

China grew 6 per cent and India 3 per cent. 

Global diamond jewellery demand rose three per cent to exceed $80 billion for the first time, the report pointed out.

It highlighted India as a rapidly developing consumer market.

Despite the industry's tribulations, Lussier remarked that fluctuations in rough diamond prices were unlikely to trickle down to consumers.

"If you look at diamond prices in local currency terms, in many countries they've gone up," he said.

The appetite for rare diamonds also remains untouched, says Jean-Marc Lieberherr, managing director of diamonds at mining giant Rio Tinto.

He is in Hong Kong for the tender of a collection of 65 extremely rare pink and red diamonds, which were unveiled in Sydney in June.

Invite only bidders make their offers in sealed envelopes as the diamonds make a private tour of Hong Kong, New York and Australia's Perth, before the results are announced in October.

"These diamonds are a niche in themselves and they are very much followed by a group of connoisseurs, traders, collectors, and high-end jewellers," Lieberherr indicated. "They know the mine will close one day — when that happens, the value will go through the roof." 

BERLIN — Truckers are warning of the threat of significant costs to the road haulage industry as European nations reimpose long-abandoned border controls to check the greatest migratory flow across the continent since World War II.

Frontier checks that had been swept away in much of Europe to allow free travel are returning to block the path of vast numbers of people seeking refuge, many from Syria, Iraq and Afghanistan.

Germany, Austria and Slovakia have all reimposed identity checks on parts of their borders, and Poland and the Netherlands are considering whether to follow suit.

Hungary's riot police this week fired water cannon at migrants on its newly-shuttered border with Serbia, and troops completed a 41-kilometre barbed-wire barrier along part of its frontier with Croatia. 

The threat to the Schengen area, a single zone with borderless travel between 26 states, has an incalculable humanitarian cost. But it has a financial price, too.

"We are experiencing delays for all our trucks. It is the same thing for everyone in the industry," said Cora Buegenburg, operations manager at Allgeier Translog, a German transport group whose lorries drive across the European road network.

"At the moment there are traffic jams everywhere," she added. "But taking alternative, longer routes means extra costs."

Germany set up border checks along its frontier with Austria a week ago to control the human tide. Austria and Slovakia followed. Now Germany is also strengthening its borders with France and the Czech Republic.

Since Monday, massive traffic jams have formed in Germany and Austria.

Disruption ahead 

When trucks are delayed they unload goods late, and are slower to pick up new cargo. It can quickly lead to capacity shortfalls, Buegenburg indicated. "And that pushes up prices."

The slowdown at national borders comes at a time of tight capacity on the European transport network because of an increase in trade, said Sebastian Lechner, managing director of the federation of Bavarian transporters.

Bavaria, the region in southern Germany that has been hardest hit by border checks so far, is crisscrossed by major European transport routes, added Lechner.

All the goods traffic from Italy, a major German trade partner, transits Austria and Bavaria, he remarked.

And as long as the tide of migrants flows towards Europe, it is impossible to predict the scale or duration of the disruption.

If controls were to be established along all the borders of the Schengen area, the loss in earnings for Dutch transport companies alone would amount to 600 million euros ($684 million) a year, assuming a one-hour delay for each border, indicated Renee Reijers, spokeswoman for the Dutch association for transport and logistics.

"More broadly, the return of border controls is a big blow to European competitiveness," the association said.

US and Chinese road hauliers can make long-haul trips without the extra cost of border delays, making industrial products more competitive, it added.

In the European Union, about three-quarters of goods traffic goes by road, with rail far behind.

Traffic snarls 

For Doriano Bendotti, secretary of the north Italian Bergamo section of Italy's road hauliers association, traffic slowdowns had increased in the border region along Germany, Hungary and the Czech Republic. 

"But we are not in an emergency situation," he said.

Transport costs to Britain had already climbed because of heightened security procedures in the French port of Calais, he added. Migrants daily try to cross from Calais to Britain, often by smuggling themselves into the backs of trucks.

Traffic snarls are a day-to-day part of the business, said the German association of freight forwarders and logistics. And they can be compensated for in part by planning longer journey times.

Nevertheless, "when a driver is stuck in a traffic jam it is paid work time", the association added. "If the border checks last weeks or longer, then companies in the industry will have to speak to their customers about adjusting prices."

AMMAN — Amman Chamber of Commerce (ACC) President Issa Murad on Sunday met separately with Belgian Ambassador Hendrik van de Velde and Japanese Ambassador Shuichi Sakurai, and discussed with them ways to enhance commercial and investment ties between Jordan and their respective countries at the private sector level.

At the meeting with Van de Velde, Murad spoke about the ACC's plan, along with a big commercial delegation, to visit Belgium during next spring, noting there are many Belgian companies investing in the Kingdom.

The ambassador said a Belgian commercial mission, headed by the foreign minister, is scheduled to visit Jordan next month to open new scopes of bilateral economic cooperation, noting that the delegation comprises companies representing different economic sectors.

During his meeting with Sakurai, Murad expressed ACC's readiness to cooperate with the Japanese embassy in Amman especially by providing it with information and acquainting it with available economic opportunities, in addition to arranging a visit to Japan at the level of the private sector next year.

The Japanese diplomat highlighted Jordan's importance as a safe and stable commercial hub in the Middle East and its role in connecting trade flows among different countries. 

LONDON — The world's leading central banks are facing the risk that their massive efforts to revive economic growth could be dragged down again, with some officials arguing for bold new ideas to counter the threat of slow growth for years to come.

A day after the US Federal Reserve (Fed) kept interest rates at zero, citing risks in the global economy, the Bank of England's (BoE) chief economist said central banks had to accept that interest rates might get stuck at rock bottom.

In Japan, where interest rates have been at zero for more than 20 years, policy makers are already tossing around ideas for overhauling the Bank of Japan's (BoJ) huge monetary stimulus programme as they worry that it will be unsustainable in the future, according to sources familiar with its thinking.

Separately a top European Central Bank (ECB) official said the ECB's bond-buying programme might need to be rethought if low inflation becomes entrenched. But he added monetary policy would not restore economic growth over the long term.

More than eight years after the onset of the financial crisis, the economies of the United States and Britain are growing at a healthier pace, in contrast to those of Japan and in many eurozone countries.

But the risk of a sharp slowdown in China and other emerging economies has prevented the Fed from starting to raise interest rates and is being watched closely by the BoE.

Investors mostly think that the Fed's delay will be short-lived and that it could begin raising rates before the end of the year, followed a few months later by Britain's central bank.

But BoE's chief economist Andy Haldane, who has long been gloomy about the chances of a sustainable recovery, said the world might in fact be sinking into a new phase of the financial crisis, this time caused by emerging markets.

In a speech on Friday that summed up the dilemma for many central banks, he said policy makers had a lot less room for manoeuvre than in the past.

Haldane indicated that the BoE's next move might be to cut its rates below their record low 0.5 per cent rather than proceed with a hike as widely expected. 

But even when interest rates do start to rise, he warned they could be pulled back again to near zero by future problems.

"If global real interest rates are persistently lower, central banks may then need to think imaginatively about how to deal on a more durable basis with the technological constraint imposed by the zero lower bound on interest rates," he said.

"That may require a rethink, a fairly fundamental one, of a number of current central bank practices," Haldane added.

Radical ideas

According to Haldane, possible solutions included giving central banks higher inflation targets or making their emergency bond-buying programmes a permanent part of their armoury, although both options had their downsides.

He raised a third and even more radical possibility: governments issuing electronic rather than paper money, making it feasible for central banks to apply negative interest rates and break the current floor of borrowing costs at zero.

One of the Fed's policy makers even called for the US central bank to set a negative interest rate at Thursday's meeting. But for now, most investors are betting on a less dramatic path for the world's central banks.

Anna Stupnytska, global economist at Fidelity Worldwide Investment, one of the world's biggest fund managers, said the Fed and the BoE remain on course to carry out a few interest rate hikes while the BoJ and the ECB carried on buying bonds.

She hopes the combination of technological advances, more spending by governments on infrastructure and reforms to boost competitiveness will also eventually help move the world economy out of its low-growth, low-inflation rut.

The Fed kept interest rates unchanged on Friday in a bow to worries about the global economy, financial market volatility and sluggish inflation at home, but left open the possibility of a modest policy tightening later this year.

In what amounted to a tactical retreat, Fed Chair Janet Yellen said developments in a tightly linked global economy had in effect forced the US central bank's hand.

"The outlook abroad appears to have become less certain," Yellen told a news conference after the Fed's policy-setting committee released a statement following a two-day meeting.

She said that a recent fall in US stock prices and a rise in the value of the dollar already were tightening financial market conditions, which could slow US economic growth regardless of what the Fed does.

"In light of the heightened uncertainty abroad ... the committee judged it appropriate to wait," Yellen added.

The policy statement also nodded squarely to the global economy as a decisive variable within Yellen's "data-dependent" Fed, warning that recent developments abroad and in financial markets might restrain economic activity somewhat and likely put further downward pressure on inflation in the near term.

But the Fed maintained its bias towards a rate hike sometime this year, while lowering its long-term outlook for the economy.

Fresh economic projections showed 13 of 17 Fed policy makers foresee raising rates at least once in 2015, down from 15 at the last meeting in June.

Traders in futures markets cut bets that the central bank would lift rates by December to around a 47 per cent probability, from 64 per cent before the release of the policy statement.

"We're in the same situation we were in before, which is uncertainty about when are they going to move," said John Bonnell, a senior portfolio manager at USAA Investments in San Antonio, Texas.

Four Fed policy makers now say rates should not be raised until at least 2016, compared to two who felt that way in June. The Fed has policy meetings in October and December.

In deciding when to hike rates, the Fed repeated it wanted to see "some further improvement in the labour market", and be "reasonably confident" that inflation will increase.

'More dovish'

Taken as a whole, the latest Fed projections of slower gross domestic product (GDP)  growth, low unemployment and continuing low inflation suggest that concerns of a so-called secular stagnation may be taking root among policy makers. One policy maker even suggested a negative federal funds rate.

The median projection of the 17 policy makers showed the Fed expects the economy to grow 2.1 per cent this year, slightly faster than previously thought. However, its forecasts for GDP growth in 2016 and 2017 were downgraded.

The Fed also forecast inflation would creep only slowly towards its 2 per cent target even as unemployment dips lower than previously expected. It sees the unemployment rate hitting 4.8 per cent next year and remaining at that level for as long as three years.

The Fed's projected interest rate path shifted downward, with the long-run federal funds rate now seen at 3.5 per cent, compared to 3.75 per cent at the last policy meeting.

Fed officials like board member Jerome Powell and Atlanta Fed President Dennis Lockhart in recent months had publicly endorsed a September rate hike, forming a near majority along with long-standing inflation hawks like Richmond Fed President Jeffrey Lacker. 

Only Lacker, who wanted to raise rates by a quarter percentage point, dissented on Friday.