Economy

No Fed taper this year, says former Bush advisor

Larry Lindsey, president and CEO of The Lindsey Group
Adam Jeffery | CNBC

The Federal Reserve won't start to scale back its massive quantitative easing bond-buying program this year, said former George W. Bush economic advisor Lawrence Lindsey.

"It's going to take a long, long time for them [the Fed] to hit their goals. I think we're going to be in a QE-type of situation for a while," he said on CNBC's "Squawk Box" Friday, after this week's decision by the central bank not to begin tapering its $85 billion a month in asset purchases.

(Read more: Straight, no taper: Fed shock puts market in limbo)

Fed policymakers are scheduled to meet next month and in December.

"I don't think they'll taper this year," predicted the Lindsey Group CEO. "If you go back and look at their own numbers, they were projecting 3.2 percent [GDP growth] for the second half of this year. We're going to be darn lucky to get to 2.2 percent."

Under that scenario, he said that "it's pretty hard to see how you're going to be tapering."

(Read more: Squawking with big brains on Wall St.)

"The Fed had the best of intentions," he continued. "It said 'if we get to this employment, if we get to this growth, we'll do it.' They didn't. They missed. They didn't do it."

After Wednesday's meeting, the Fed also revealed cuts in its projection for 2013 economic growth to a 2.0 percent to 2.3 percent range from a June estimate of 2.3 percent to 2.6 percent. The downgrade for 2014 growth was even sharper.

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"If you want to think about headwinds going forward, we've got, say, $4 trillion of monetary unwinding to do … plus we have a fiscal deficit that has to come down probably $800 billion a year at some point," said Lindsey. "You add that all up and you've got 9 points of GDP growth as a headwind that you at some point have to unwind."

"Why people somehow think with all that coming at us we're ever going to grow faster than we are now, I think it's kind of wishful thinking," he argued, saying the "real lesson here is that transparency isn't everything it's cracked up to be." The Fed should not be laying out every detail of its strategy, he said. "Tying yourself to particular numbers is not a very good strategy."

The central bank reiterated it would not start to raise rates at least until the unemployment rate fell to 6.5 percent, as long as inflation did not threaten to go above 2.5 percent. The U.S. jobless rate in August was 7.3 percent.

With a taper delay, will the timetable for increasing rates be pushed back too? Lindsey said: "My suspicion is when these sort of things happen, the central bank never quite raises rates exactly when it wants to. It raises them when the market forces them to."

—By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC. Reuters contributed to this report.