World Bank’s Kim Urges Gradual Fed Tapering as Nations Prepare

World Bank President Jim Yong Kim said he hopes the Federal Reserve will exit its monetary stimulus bit by bit as he urged emerging markets to prepare for a wave of higher global interest rates.

“As long as anything that happens is gradual, we think that developing economies will be able to respond effectively,” Kim told Bloomberg Television’s Betty Liu. “Anything abrupt would be more problematic.”

Bond prices slumped internationally and emerging-market stocks plunged after May 22, when Fed Chairman Ben S. Bernanke said for the first time the central bank could taper its $85 billion-a-month asset-purchase program. While those market movements were partly reversed after the Fed maintained its policy, the International Monetary Fund and the World Bank have called on nations from Turkey to Indonesia to strengthen their economies in preparation for the reduction.

Kim said there’s “a little window” for developing economies to act and take measures ranging from fiscal policy to debt management.

Some of the emerging markets that were growing fast are beginning to pay the price of not having adjusted their policies, former Bank of Israel governor Stanley Fischer said at a conference in Washington today. India in particular has been “a great disappointment,” with next year’s election threatening to drive policy-making, Fischer said.

“India had it right and then the politics has taken over and it’s doing things that do not make a lot of sense economically,” Fischer said at the Wall Street Journal’s CEO Council conference. “Whenever there’s an election coming up, it’s worth considering what they’re going to do up to the election and how long it will take them to undo it.”

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