Fed may be audience, not actor in rate hike: Portfolio Manager

Inflation indicators are beginning to signal a rise in prices across the board—from energy to materials sector equities—and the Federal Reserve may see its role in guiding the path of interest rates upward diminished, portfolio manager Michael Zinn said Friday.

The central bank is widely expected to begin hiking its benchmark interest rate in 25-basis-point increments later this year. The Fed has kept rates near zero since December 2008 and will factor rising prices into its decision to raise rates.

"That tightening show is beginning to start and it's not clear whether the Fed is going to be in the audience or on the stage," said Zinn, senior portfolio manager at UBS Financial Services. "You are seeing rates move higher without the Fed making a move yet."

U.S. Treasurys have recently fallen, weighed down by a global slide in government bond markets that is pushing yields to 2015 peaks. Benchmark 10-year Treasury yields neared 2.3 percent Thursday before closing at 2.184 percent.

Read More Fed could lose control of bond yields: Boockvar

Stocks have had "a pretty healthy pullback response to a pretty unhealthy development on the fixed income side," Zinn said on CNBC's "Squawk Box." Fixed income is looking weaker and more tenuous, and higher corporate bond rates may lead to a surge in mergers and acquisitions as companies anticipate a shorter timeline before rates go higher.

Bond yields and prices move in opposite directions.

While inflation expectations are increasing, the outlook for economic growth remains unchanged, Zinn said. That dynamic could set up a bumpy road for investors.

"We better generate some growth, or else markets are going to have a tightening experience without a growth experience and you're going to get more volatility," he said.

—CNBC's Jenny Cosgrave contributed to this report.

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