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US Federal Reserve vice-chairman Stanley Fischer said weaker-than-expected global growth could prompt the US central bank to slow the pace of eventual interest-rate increases.

“If foreign growth is weaker than anticipated, the consequences for the US economy could lead the Fed to remove accommodation more slowly than otherwise," Fischer said in speech on Saturday in Washington.

Fischer said the Fed won’t raise rates until the US expansion “has advanced far enough," and emerging markets should be able to weather the increase.

Fischer’s remarks highlight growing concern among US central bank officials about the impact of a global slowdown and a strengthening dollar.

He spoke to central bankers and finance ministers gathered in Washington for the annual meetings of the World Bank and International Monetary Fund (IMF).

The Fed’s policymaking body last month expressed concern that weak demand, particularly in Europe, could add to the dollar’s appreciation, hurting US exporters and damping inflation, according to minutes released 8 October.

The IMF this week reduced its forecasts for global growth in 2015 and warned about the risks of rising geopolitical tensions and a financial-market correction as stocks reach “frothy" levels.

The world economy will grow 3.8% next year, compared with a July forecast for 4% after a 3.3% expansion this year, IMF said. The euro area will grow 1.3% next year, slower than the 1.5% predicted in July.

Most Fed officials expect to raise the benchmark interest rate some time next year, according to projections released on 17 September following their last meeting.

Traders see about a 33% chance that the Fed will raise the benchmark rate by its July 2015 meeting, down from a 59% on 18 September, Fed funds futures data compiled by Bloomberg show.

“Tightening should occur only against the backdrop of a strengthening US economy and in an environment of improved household and business confidence," Fischer said.

Fischer, the former head of Israel’s central bank, said that the Fed’s monetary-policy decisions have a significant impact on economies around the world.

He said he believed emerging-market countries have improved their preparedness for higher interest rates in the US by reducing inflation, improving debt levels, building foreign reserves and better regulating their financial systems.

“It does not seem that the overall risks to global financial stability are unusually elevated at this time," Fischer said.

He said foreign economies should also benefit from improved communication from the Fed.

“The Federal Reserve will promote a smooth transition by communicating our assessment of the economy and our policy intentions as clearly as possible," he said. Bloomberg

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