The contents of the Stern review into the economics of climate change - commissioned by the Treasury - have been kept secret since the nature of the work was revealed to the world's environment ministers in Mexico this month. But Sir David King, the government's chief scientific adviser, yesterday gave the Guardian a preview of its main findings.

Speaking at a climate change conference in Birmingham, he said: "All of [Stern's] detailed modelling out to the year 2100 is going to indicate first of all that if we don't take global action we are going to see a massive downturn in global economies." He added: "If no action is taken we will be faced with the kind of downturn that has not been seen since the great depression and the two world wars." Sir David called the review "the most detailed economic analysis that I think has yet been conducted".

The review will highlight the threat of sea level rise. Sir David said: "If you look at sea level rises alone and the impact that will have on global economies where cities are becoming inundated by flooding ... this will cause the displacement of ... hundreds of millions of people."

Sir David's comments mirror those of the foreign secretary, Margaret Beckett, on Tuesday. "This is not just an environmental problem," she said. "It is a defence problem. It is a problem for those who deal with economics and development, conflict prevention, agriculture, finance, housing, transport, innovation, trade and health." Sir Nicholas will argue that tackling the problem may not prove as economically painful as some experts predict. Investment in low-carbon technologies could stimulate the global economy. Sir David said: "[Stern's] analysis, I think, will also surprise many people in terms of the relatively small cost of action."

The International Energy Agency predicts that $15 trillion (£8 trillion) of investment in new energy sources will be required over the next 15 years. "The massive investment programme that's ahead of us is an opportunity for us to move towards a zero carbon energy system. The investment process is going to act quite possibly in the opposite direction to an economic downturn," Sir David said.

He told the Rapid Climate Change conference, organised by the Natural Environment Research Council in Birmingham, that achieving global political consensus would be extremely difficult. "In my view this is the biggest challenge our global political system has ever been faced with. We've never been faced with a decision where collective decision making is required by all major countries." The timescale too is unprecedented. "Actions being asked of the political system today are only going to play through into mid-century and beyond. So for the first time we are asking a global political system to make decisions around risks to their populations that are well outside the time period of any election process."

He drew parallels between scientific advice on global warming and advice from seismologists ahead of the Boxing Day tsunami. A month before the disaster a delegation warned governments around the Indian ocean about the extreme danger posed by tectonic activity under the sea. No government chose to act on the advice. "$30m as the cost to install some kind of early warning system presumably looked like a lot of money." But such a system could have saved 150,000 lives.

The central bank last night kept borrowing costs on hold for the third meeting running, arguing that falling energy prices should bring down 'elevated' inflation.

After a two-day meeting, the bank's federal open market committee (FOMC) voted 10-1 to keep its main interest rate at 5.25%. In a statement, the FOMC said economic growth had slowed to reflect a cooling housing market, but was 'likely to expand at a moderate pace' in the future.
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Inflation pressures, while 'elevated' now, should 'moderate over time' thanks partly to falling oil prices, the panel said in its communique, which contained only marginal changes from last month.

US economists said the FOMC seemed poised to keep US rates on hold for some time to come, after calling off a long-running campaign of increases in August. The FOMC's sole dissenting voice was the hawkish head of the Richmond Fed, Jeffrey Lacker, who again wanted a quarter-point rise in rates.

Most analysts still believe the Fed's next move will be to cut interest rates. That would be its first reduction since June 2003, when it lowered the fed funds rate to a historic depth of 1%. For the next year, it kept the rate on hold before starting its long run of hikes in June 2004 which continued until the August pause of this year.

Evidence is mounting that the US economy, after growing robustly since 2001, is now hitting the brakes. US gross domestic product slipped to a second-quarter pace of 2.6%, compared to a blistering 5.6% clip in the first three months of the year.

The first GDP estimate for the third quarter, due out tomorrow, is expected by most economists to show growth slowing further to 2.1%.

But in a headache for the Fed, inflation remains stubbornly high at the same time that growth is slowing. US consumer prices fell 0.5% in September. But that was due to tumbling energy costs, and 'core' prices excluding food and energy rose 0.2%.

The Fed's Open Market Committee kept the nation's benchmark rate unchanged at 5.25 percent for a third straight meeting, but it noted in its accompanying policy statement that recent readings on inflation have moved higher recently. Stocks waffled after the Fed's decision was released as investors worried that inflation concerns could prompt the central bank to resume its rate increases in the future.

There may also have been some disappointment on Wall Street because "it's not a sign that the Fed is going to be cutting rates anytime soon," said Drew Matus, senior economist at Lehman Brothers.

Still, the market held up well. There were really few, if any, surprises in the Fed's statement, which described the economy as likely to grow at a moderate pace after more than two years of rate increases.

"I think that the stock market, if it has one mind, is saying the soft landing is in place, that the Fed is on hold for a while," said Jerry Webman, chief economist at Oppenheimer Funds.

"The stock market thinks the Fed just patted them on the back and said, go ahead boys and girls," Webman said.

According to preliminary calculations, the Dow rose 6.80, or 0.06 percent, to 12,134.68. After the Fed announcement, the Dow reach another new trading high of 12,147.97 before pulling back; it also set new trading and closing records the previous session.

Broader stock indicators also closed higher. The Standard & Poor's 500 index rose 4.84, or 0.35 percent, 1,382.22, and the Nasdaq composite index rose 11.75, or 0.50 percent, to 2,356.59.

Bonds rallied, with the yield on the benchmark 10-year Treasury note falling to 4.76 percent from 4.82 late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude settled up $2.05 at $61.40 a barrel on the New York Mercantile Exchange after a weekly Energy Department report showed an unexpected drop in crude inventories. Meanwhile, sentiment has grown in recent days that OPEC production cuts might help shore up oil prices. On Friday, oil prices fell to their lows for the year.

As investors try to gauge the health of the economy they also looked at quarterly reports Wednesday from big names like GM and Altria Group Inc. (MO), the parent of tobacco-products maker Philip Morris.

Investors have also paid close attention to economic news as they try to determine how quickly the economy is slowing and whether it can pull off a soft landing. One possible area of concern was a report from the Chicago Fed that showed its National Activity Index fell to its lowest readings in 11 months in August.

The market had little reaction to a report early in the session from the National Association of Realtors that existing home sales declined 1.9 percent to a seasonally adjusted sales pace of 6.18 million units, marking the slowest sales rate since January 2004. Also, the median price of a home registered a sharp drop.

In corporate news, GM fell $1.48, or 4.1 percent, to $34.71, despite reporting that its third-quarter loss narrowed as cost-cutting aspects of its turnaround plan began to take hold and as sales rose about 4 percent. The world's largest automaker said its loss for the quarter fell to $115 million, or 20 cents per share, from $1.7 billion, or $2.94 per share, a year earlier.

Altria rose $2.28, or 2.9 percent, to $82.10 after saying it plans to announce in January plans for a spinoff of Kraft Foods Inc. (KFT) and despite reporting third-quarter results that came in slightly below Wall Street's expectation.

Boeing Co. (BA), like GM and Altria part of the 30 stocks in the Dow, fell $2.73, or 3.3 percent, to $80.86 after the No. 2 commercial aircraft maker behind Airbus saw its third-quarter profit fall 31 percent as the company recorded expenses to discontinue an in-flight Internet service.

Amazon.com Inc. (AMZN) advanced $4.05, or 12 percent, to $37.68 after the Internet retailer reported a stronger-than-expected third-quarter profit following a disappointing second quarter.

Taser International Inc. (TASR), which makes stun guns, rose 25 cents, or 2.7 percent, to $9.45 after posting a sharp increase in third-quarter earnings.

Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 1.82 billion shares compared with 1.69 billion shares at the same point Monday.

The Russell 2000 index of smaller companies was up 4.72, or 0.62 percent, at 767.15.

Overseas, Japan's Nikkei stock average closed down 0.48 percent. Britain's FTSE 100 closed up 0.52 percent, Germany's DAX index was up 0.28 percent, and France's CAC-40 was up 0.33 percent.

The National Association of Realtors said sales of previously owned homes fell 1.9% in September to a seasonally adjusted sales pace of 6.18 million units, slowest sales rate since January 2004.

The median price of a single-family home fell to $219,800 last month, a drop of 2.5% from the median price in September 2005. That was the biggest year-over-year price decline in records going back nearly four decades.

Housing, which had set sales records for both new and existing homes for five years, has been rapidly losing altitude this year, as consumers were hit by rising mortgage rates, soaring energy prices and a slowing economy.

But economists with the Realtors say they believe the housing decline could be hitting bottom.

"The worst is behind us, as far as a market correction - this is likely the trough for sales," said David Lereah, the Realtors' chief economist. "When consumers recognize that home sales are stabilizing, we'll see the buyers who've been on the sidelines get back into the market."

But analysts say the weakness in housing could last several months more, with a real upturn in sales not coming until spring.

Sales were down in all sections of the country except the South, which posted a small 0.4% rise. Sales fell the most in the Northeast, a drop of 3.7%, followed by the West, where sales were down 3.1%, and the Midwest, where sales fell 2.8%.

The inventory of unsold homes, after climbing to all-time highs, fell for a second month, decreasing 2.4%, to 3.75 million unsold homes at the end of September, which represents a 7.3 month supply at the September sales pace.

Sales of single-family homes dropped 1.6% to an annual rate of 5.42 million units while sales of condominiums fell 3.2% to an annual rate of 763,000 units.

Condominium prices fell 3.2% to a median price of $219,800, matching the median for single-family homes.