World Bank Praises Fed for Decision to Hold Off on Rate Hike

While many Americans breathed a sigh of relief after the US Federal Reserve (Fed) announced that it would not be increasing the prime rate this month, the decision also had ramifications for other nations. As a result, the head of the World Bank praised the Federal Reserve’s decision, saying it will grant a temporary reprieve to developing nations and struggling economies around the world.

While many Americans breathed a sigh of relief after the US Federal Reserve (Fed) announced that it would not be increasing the prime rate this month, the decision also had ramifications for other nations. As a result, the head of the World Bank praised the Federal Reserve’s decision, saying it will grant a temporary reprieve to developing nations and struggling economies around the world.

In an interview with The Associated Press, World Bank President Jim Young Kim noted that China’s current economic slowdown was “entirely predictable.” However, he remained optimistic, adding that the slower growth will lead to a more sustainable Chinese expansion in the long run.

President Kim’s comments came ahead of a U.N.-sponsored meeting on a new 15-year sustainable development plan.

President Kim remained realistic about the Fed’s decision, noting that it was a question of when, not if the Fed raises America’s prime interest rates from its current record lows near zero. However, he also said that the Federal Reserve’s decision not to immediately raise the rate would give breathing room to developing countries working on reforming their economies.

Speaking of the decision’s effect on other nations, Kim said, “What this has done is given us time to go back to emerging markets and developing countries and say ‘OK, you’ve got a little reprieve.'”

Thanks to the extra time, the World Bank will now have an opportunity to encourage developing nations and those in recovery to make necessary reforms to ensure that when rates do go up, they will better be able to weather the storm. Kim noted that the World Bank does not want hard fought progress in these nations to evaporate when the rate does go up because of a mass exodus of investors.

Obviously, Kim directed many comments to the current issues in China. China’s decision to shift its economy from an export-based one to a domestically driven, self-sufficient, consumption-based model has led to some uncertainty in its growth rate. China remains committed, to this reform process, which, according to Ki, should lead to “much more sustainable and higher quality growth.”

China has the second largest economy in the world (second only to the United States), but is also one of the primary holders of American debt. Given the significant intertwining of the two economies and their overwhelming influence on global markets, the World Bank has been lobbying hard for the Fed’s delay in order to stave off a possible return to global recession.