Investors push Fed: Go now, go big

With markets on tenterhooks ahead of the Federal Reserve's next meeting, a raft of investors are confident that it's now or never for the crucial interest rate hike.

Colin Graham, CIO of BNP Paribas Investment Partners' multi-asset solutions business, for instance, places a 60 percent likelihood on the Fed raising rates this month and says it is "pretty clear" the central bank will hike before the end of 2015.

"I don't think a 25 basis point rise will make any difference now… if they don't go now it gets harder and harder for them to go," Graham told journalists at a briefing by the bank on Tuesday.

"When we get the first commentators saying that the Fed is behind the curve, then, we know that monetary policy is back on the table," he later added.

Similar to other major central banks in developed economies, the Fed has held rates at near-zero for nearly seven years, following the global financial crisis of 2007/08.

Now, with economic data showing a gradual but sustained improvement, a hike is viewed as increasingly likely—but the question is when exactly. Another key indicator is inflation, which came in at a subdued 0.2 percent in the 12-month period to July 2015.

However, Graham said inflation "isn't dead" and that there was potential for "upside surprises."

David Bianco, chief U.S. equity strategist at Deutsche Bank, told CNBC that the Fed should and would hike in September. He bullishly advised that the central bank opt for a 50 basis points rise, rather than the 25 basis points suggested by some economists.

"What we would like to see them do is get this done and behind," Bianco said on Tuesday.

"We think it is appropriate to get a hike done, but we don't want to see a hike coming every time they have a meeting over the next six months."

Graham noted that there had been "huge issuance" of corporate debt this year, as companies sought to lock in lower prices before the Fed hikes.

In the first eight months of the year, U.S. companies issued $1.091 trillion in debt, up roughly 12 percent on the £970 billion issued during the same period of 2014, according to the Securities Industry and Financial Markets Association.

Nonetheless, some economists have suggested the Fed should delay hiking in the wake of last month's staggering turmoil in Chinese stocks, which hit assets around the world and intensified fears of a "hard landing" for the world's second-biggest economy.

"If Janet Yellen and the Fed decide they are going to increase interest rates to drive the dollar higher, what they are asking for is a big increase in the trade deficit in the United States, which will directly affect the jobs situation in this country. So I don't think she can really do that," Dick Bove, the vice-president of equity research at Rafferty Capital Markets, told CNBC on Tuesday.

"The bottom line is, we do have a currency war; we do have central banks around the world easing monetary policy—obviously the European (Central) bank last week suggested that might continue," he added separately.

However, Graham saw no direct impact from China on the U.S., which he described as one of the developed world's most closed economies.

He did say, though, that the Fed was concerned about the impact on U.S. earnings from the strength of the dollar, which has been boosted by the depreciation in emerging market currencies in general and the yuan in particular.

The greenback is up 6.5 percent this year against a basket of currencies and 2.6 percent against the yuan.

Graham added that the growth in zero-hours contracts, which allow employers to hire staff with no guarantee of work, had helped keep wage growth low.

In addition, he said that employees were increasingly prioritizing work-life balance over gaining the highest possible salary; a post-crisis attitudinal change that he said was only partially driven by the weak wage environment.

However if wage growth accelerated, "I think we would get a lot more people coming back into the workforce," he concluded.

—By CNBC's Katy Barnato. Follow her on Twitter @KatyBarnato.