Don't expect the Federal Reserve to raise interest rates until 2016, Morgan Stanley's chief U.S. economist told CNBC on Friday.
"The Fed wants to be raise rates this year," Ellen Zentner said in an interview with "Closing Bell."
However, "there's a difference between what the Fed wants to do and what we think they will be able to do."
Zentner said key economic data will stand in the central bank's way, specifically lack of pick up in nominal wage growth and consumer prices, or core PCE inflation.
While wage growth is coming, inflation is a real problem, she said.
"They don't need it to be at their 2 percent goal, [Fed Chair] Janet Yellen has said that, but the problem is right now it is moving away from goal."
The strong dollar will also be a factor, Zentner said.
In fact, she said that if the central bank were to raise rates now, it would do harm to the U.S. economy.
"This is a Fed that likes to err on the side of caution. This is a Fed that buys into the asymmetric risk of tightening policy too early. That it's more risky to do that than tighten policy too late, and that it would be a policy mistake if they went early because you just don't know," Zentner said.
That said, there are two factions within the Federal Reserve, she noted. One that is willing to put faith in the economic outlook that all of the pieces will fall into place, and the other who wants to see proof in the data.
Many are expecting the Fed to hike rates mid-2015. During her congressional testimony in February, Yellen testified there would not be a rate hike for the next couple of meetings.
The central bank's policy-making arm, the Federal Open Market Committee, meets next week and Wall Street will be watching to see if the FOMC will cut the word "patient" from its statement when referring to raising rates.
Zentner believes "patient" will be dropped at the next meeting, but only because the Fed feels markets have gotten the message that its removal doesn't mean an imminent rate hike.