BNP Paribas expert: Fed's all bark and no bite

The Federal Reserve will indicate it wants to raise interest rates later this year, but will not go through with it at its meeting this week, Paul Mortimer-Lee, global head of market economics at BNP Paribas, said Tuesday.

"I think they will show through the circled dots that they will hike three times this year. So the message is, 'we're not going in March, because of uncertainty, but we're highly inclined — if the market and the data allow us — to go in June,'" he told CNBC's "Squawk on the Street."

"I don't think the data will allow them to go in June."

The Fed kicked off its two-day policymaking meeting Tuesday, and is expected to leave interest rates unchanged, according to the CME Group''s FedWatch tool.

Recent economic data have been mixed, with the U.S. unemployment rate at its lowest levels in nearly eight years, while retail sales are down for the year.

This, along with other data, is raising the question of "Did the market turmoil have more of an impact on sentiment and, therefore, activity than previously thought?" Mortimer-Lee said.

The central bank raised rates in December, but they are still relatively low when compared to historical levels. Robert Heller, a former Fed governor, said the unintended consequences of leaving rates low for too long "can be pretty dire."

"Financial markets are offering only very, very low returns. So corporations, insurance companies, pension funds, that rely on high returns to fulfill their obligations, they will be squeezed very hard," he said Tuesday in another "Squawk on the Street" interview.

"I wouldn't be surprised if our next crisis will be something like insurance companies and pension funds not being able to fulfill their obligations."

Stocks were modestly lower midafternoon Tuesday, on track for a second straight day of declines, after posting gains for each of the past four weeks.