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This Fed failure hurting stock market: BlackRock

While investors play the guessing game on when the Federal Reserve might increase interest rates, the real problem weighing on the stock market is uncertainty surrounding what such a move would mean, BlackRock's Peter Fisher said Friday.

Despite the concerns about China that recently slammed world financial markets, the Fed should hike rates at next month's meeting, the senior director of the BlackRock Investment Institute told CNBC's "Squawk Box" in an interview.

More importantly, he argued, central bank policymakers need to reach a consensus on the longer-term trajectory for rates. "They've been having a free lunch all of them explaining their own views ... when it hasn't mattered. It's going to start mattering."

"Explain whether you're going to raise rates slowly, which is what [Fed Chair Janet Yellen] has been saying for a few months," urged Fisher, who had held key positions at the Federal Reserve Bank of New York for more than decade, ending in 2001.

"A year ago," Fisher recalled, "[Yellen] was saying once they start raising rates they'd raise quickly," he warned. "Now other members of the committee are starting to introduce that. They need to get on one page on the path."

Inflation hasn't risen enough to meet the Fed's targets and that's another challenge, Fisher said. "The policy they've been pursuing is to pump up asset prices in the hope it generates consumer price inflation," he said, "and it hasn't worked for five years."

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