The World Bank joined the IMF in urging the Federal Reserve to hold off raising rates until next year, citing an uneven U.S. recovery and the risks to emerging markets of tightening policy any sooner.

“My concern is that the signals coming out of the U.S. economy have been mixed,” World Bank Chief Economist Kaushik Basu told reporters Wednesday in Washington on a conference call to discuss the bank’s semiannual global economic forecasts.

A premature move by the Fed could cause the dollar to strengthen, which may slow the U.S. economy and sideswipe emerging and developing countries, he said.

The Washington-based development bank lowered its forecast for U.S. growth this year to 2.7 percent, from 3.2 percent in January. The bank also expects the U.S. to expand at a 2.8 percent pace next year, down from 3 percent in January.

The International Monetary Fund issued a similar warning last week, urging the Fed to delay raising rates until next year unless growth and inflation pick up more than expected.

David Fuller's view

The most important point here concerns the US Dollar, which has slowed US GDP growth and caused some problems for emerging market countries which borrowed USD while the Fed’s QE programme was still in play.

Dr Janet Yellen will certainly take note of the IMF’s and World Bank’s suggestion, while deciding on the basis of the Fed’s own outlook.

However, I maintain that the Fed should nudge the US Dollar Index lower in the interests of GDP growth and international stability.  A lengthy ranging consolidation phase below 90 would do the trick, easing IMF and World Bank concerns.  Nevertheless, the Greenback will rise over the longer term, given the USA’s technology lead, including its ability to increase crude oil production rapidly when prices rise.