Emerging markets can deal with gradual Fed taper: World Bank's Kim

WASHINGTON Tue Dec 10, 2013 11:09am EST

World Bank President Dr. Jim Yong Kim is interviewed by the President of the Economic Club of Washington David Rubenstein (not pictured) during a morning breakfast session in Washington December 10, 2013. REUTERS/Gary Cameron

World Bank President Dr. Jim Yong Kim is interviewed by the President of the Economic Club of Washington David Rubenstein (not pictured) during a morning breakfast session in Washington December 10, 2013.

Credit: Reuters/Gary Cameron

WASHINGTON (Reuters) - Emerging markets could adjust to the withdrawal of the Federal Reserve's massive monetary stimulus as long as it happens gradually, World Bank President Jim Yong Kim said on Tuesday.

Fed chief Ben Bernanke shocked emerging markets in May when he raised the possibility that the U.S. central bank could soon embark on a draw-down in its $85 billion a month bond-buying program, known as quantitative easing.

"If the tapering happens over a longer period of time, gradually - which is what we would expect - ... we think that the emerging economies, especially in the poor countries, can adjust," Kim told reporters after speaking at the Economic Club of Washington.

The World Bank focuses on helping developing countries grow and fight poverty. Kim last month said that emerging markets had seen about a third of the overall increase in interest rates likely to come as the Fed tapers.

The Fed surprised financial markets again in September by opting not to reduce its $85 billion per month bond-buying pace. But economists think signs of vigor in the U.S. job market will lead the central bank to make a move to trim asset purchases by early next year.

Kim defended Bernanke's decision to talk about the Fed's withdrawal from monetary stimulus in May, long before it would happen, which roiled markets and raised questions about the effectiveness of Fed communications.

"We feel he did exactly the right thing by communicating in advance that it could happen," Kim said.

(Reporting by Anna Yukhananov; Editing by James Dalgleish and Meredith Mazzilli)

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