US treasury secretary Henry Paulson today warned high oil prices increase risks to the US economy.
Speaking after a meeting this morning with Alistair Darling and a number of UK financial chief executives, Mr Paulson warned about the effects of high oil prices now heading to a record price of $144 dollar a barrel.
He said: "This is a tough quarter we are in, we have challenges.
"Oil prices are a strong headwind and there is a high risk they will prolong a slowdown."
However, Mr Paulson maintained some confidence in the US economy.
"Given the challenges, the economy is hanging in as well as possible. We have a resilient economy. There is a very strong possibility we will be growing at the end of the year. The long-term fundamentals are strong."
He added the current problems facing the US economy were "not acceptable to the American people".
Mr Darling meanwhile confirmed the greatest threat to the UK economy stemming from rising oil and food prices was inflation.
"Of utmost importance is we do not get into position where inflation is entrenched as seen in the 1970s, 1980 and 1990s, when inflation was at eight per cent," the chancellor said.
"Countries need to work together to bring down prices, which are way above what people would have expected two years ago."
He added many of the problems facing the UK economy are very different from previous crises due to the international pressures.
Mr Paulson and Mr Darling also discussed regulation to capital markets to promote stability and bring a close to the credit crunch.
Also on the agenda were ways of ending funding to terrorist organisations, with Iran specifically dealt with.