World Bank: “Developing economies should brace for possible financial market turbulence from the upcoming U.S. monetary policy tightening cycle, according to a new World Bank policy research paper released ahead of this week’s meeting by the U.S. Federal Reserve’s policy-setting Federal Open Market Committee. The new paper The Coming U.S. Interest Rate Tightening Cycle: Smooth Sailing or Stormy Waters? suggests that while a likely rise in US interest rates, which would be the Fed’s first rate hike since 2006, has been widely telegraphed to world financial markets and the public, it nonetheless runs a risk of being associated with market volatility. The Fed has set the stage for the tightening cycle carefully and there is every reason to envision a smooth transition with benign effects on emerging and frontier markets. However, there can be financial market volatility even around a long-anticipated Fed policy change. This could lead to a sizable drop in capital inflows to emerging and frontier markets. The new research paper assesses the potential impact on developing economies if financial market reaction to Fed tightening mirrors the upheaval that occurred after the U.S. central bank signaled in May 2013 that it was poised to taper its pace of quantitative easing…”