"The Fed stared into the deflationary abyss and backed away. They are lowering their growth forecasts, they are telling us that economic growth going forward is weaker than they previously thought," he added.
The U.S. central bank has always said it would only reduce the pace of its bond buying program if the economy was strong enough to withstand it. The bank set thresholds, namely that unemployment would need to fall to 6.5 percent, from current levels of 7.3 percent, and said it would only taper if inflation rose to 2.5 percent, from current lows of 1.5 percent.
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However, economic data out of the world's largest economy has disappointed in recent months, and last week the Fed reduced its growth projections for this year and next. The bank also warned that fiscal tightening in Washington in the form of sequestration spending cuts remained an obstacle to growth in its most recent Federal Open Market Committee meeting.
Dempsey said it was clear the U.S. economy had not recovered enough to warrant a taper anytime soon.
"We have evidence of [slower growth] in the U.S., looking at casual dining chains that keep reporting lower and lower top line sales. That's where an average American would be eating out," he added.
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But Dempsey believes the main factor holding back the onset of tapering is Bernanke's reluctance to carry out a major policy change just before his term expires on January 31.
"Bernanke's term is up in January [and] for him to taper [it] would be a major shift or policy change that he would lock his successor into; it's not logical. Because why would he want to lock his successor into a policy change that they may not agree with?" added Dempsey.
Following the withdrawal of Lawrence Summers' - the more hawkish candidate - bid to be the next Fed chairperson earlier this month, vice-chair Janet Yellen now looks to be a shoo-in for the role. Dempsey told CNBC that an extremely dovish new Fed chairperson would push out the chance of tapering even further.
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"Yellen is the presumed next chairman. She is very dovish and is on record as saying that she would vote for interest rates below zero if there was such a thing to vote for...I suspect that [if Yellen gets the role] we might not see tapering for quite a long time," he added.
— By CNBC's Katie Holliday: Follow her on Twitter @hollidaykatie