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Fed pouring fire on glowing embers of inflation: Grant

The Federal Reserve is "pouring fire" on the "glowing embers of inflation" as it expands its balance sheet while tapering its bond-buying stimulus, Jim Grant, founder and editor of Grant's Interest Rate Observer, told CNBC Tuesday.

In an interview with "Closing Bell," Grant said the Fed's monetary policy has led to an inflation of asset values, will likely lead to a measured rate of consumer price inflation and will certainly lead to "financial turmoil." If that turmoil is severe enough, he thinks it could introduce another risk of deflation.

Read MoreFed in focus as investors seek reassurance

"Deflation is a monetary event such that prices collapse, not because productivity is higher but because everyone has to sell and that is part and parcel of a financial accident," he said. "The Fed is going to give us a financial accident."

The Federal Reserve began its two-day meeting Tuesday. It is expected to continue cutting back its stimulus by $10 billion per month.

Chris Goodney | Bloomberg | Getty Images

Grant bemoaned the Fed's history of intervention—from Dodd-Frank to quantitative easing to the recent report by the Fiscal Times that the central bank is looking at whether exit fees should be imposed on fond funds.

Read MoreFed looks at exit fees on bond funds

He likened the Fed's intervention to "little lies."

"You can't just lie once. You can't just intervene once. You must keep intervening to negate or counteract or mollify the effect of earlier interventions," he said.

While we can't know what the future will bring in terms of interest rates, Grant believes we can see how the future is being handicapped and place "interesting bets on apparently diminutive odds."

Read MoreFedspeak 3.0: The 'dot plot'

He sees opportunity in gold mining stocks, which are near generation lows.

—By CNBC's Michelle Fox

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