"I think they are following guidance from Stanley Fischer to keep the uncertainty out there," he said in an interview on CNBC's "Squawk on the Street." "In their mind, heaven forbid, data began to accelerate toward a rate hike, if they didn't prepare everybody they'd be in deep trouble. So I think what they want to do is keep that possibility out there."
Earlier on Tuesday, Fed Gov. Jerome Powell, a voting member on the policy-setting committee, said he sees the possibility for a rate increase in September, followed by another one in December.
Cashin, who is UBS director of NYSE floor operations, said that the rally in the morning "took us back to yesterday's highs, and now we've pulled back a little bit from that."
In the meantime, he said, the markets are taking their own pulse as voting Fed members continue to make statements about the possibility of a hike this year.
—Matthew Belvedere contributed to this report.