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Jim Grant: Here's why Fed won't remove 'patient'

The Federal Reserve can change how things look but "not how they are," the founder and editor of Grant's Interest Rate Observer said Wednesday, as Wall Street awaited the central bank's afternoon policy statement.

In an interview on CNBC's "Squawk Box," Jim Grant said the consequences of the Fed's easy money stance since the financial crisis—or "price controls" as he calls them—play out silently. He's been a long-time proponent of normalizing rates.

"Central banks the world over have been suppressing [rates], manipulating them, and otherwise manhandling them," Grant argued, predicting "this experiment will end in failure" because price controls never work.

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Many market participants expect the Fed to remove the word "patient" from the debate on when to increase interest rates for the first time in nearly a decade. June has been seen as a possible start date.

The Fed started cutting rates in 2007, and they are now at near-zero percent levels.

Despite his personal views, Grant believes central bankers won't remove "patient," because of the strong dollar and a weaker underlying economy. "The surprise might be that the Fed reverts to its now very familiar stance of ease."

He pointed to a rolling forecasting model by the Atlanta Fed for real GDP after the release of major economic numbers. The model estimates a first quarter seasonally adjusted annual growth rate of 0.3 percent.

It's possible history could vindicate the central bank's extraordinary moves, Grant acknowledged.

But he said he worries about the precedent that's been set. In the event of a future economic crisis or a bear market in stocks, the Fed would be "duty-bound to re-enter the market just as forcefully as it has done since 2007," he said.

"The virus of radical monetary policy is in the political bloodstream, meaning we can't go back now," he continued. "They're bound to come back and do more."

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