World Bank warns ‘prepare for the worst’ on US rate rise

The World Bank has warned developing countries to “prepare for the worst” when the Federal Reserve starts to raise interest rates.

The BBC cites a report from the World Bank ahead of any decision on interest rates tomorrow by the US central bank.

The World Bank argues while any impact may be modest, it is also possible capital flows into developing countries would be disrupted, harming economic growth and financial stability.

It acknowledges any increase to US rates has been expected for a long time and rate rises are set to be gradual.

But it also suggests there is a “perfect storm” of government and private sector debt, and trading deficits which have to be financed from abroad.

The World Bank is also concerned developing countries such as Brazil, Turkey and Venezuela could see weaker economic growth.

The report says developing nations should be “hoping for the best but preparing for the worst”.