Federal Reserve

How Fed can fall into the 'Greenspan trap': Expert

The 'Greenspan trap'
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If global growth concerns make the Federal Reserve wait to raise short-term interest rates, the central bank risks falling into the "Greenspan trap" and contributing to long-term turmoil, one economist said Wednesday.

"The question is whether the Fed will fall into the Greenspan trap and pay too much attention to what's going on internationally and not enough attention to what's going on domestically," said Samuel Rines, an economist and analyst at Chilton Capital Management.

Rines references former Fed Chairman Alan Greenspan, who led the central bank in the easy money era ahead of the burst of the housing bubble in the mid-2000s. As the Fed decides when to move from near-zero interest rates at its two-day policy meeting, it should worry about the effects of waiting too long, Rines contended in a CNBC "Power Lunch" interview.

Alan Greenspan, former Federal Reserve chairman
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The central bank risks losing its ability to normalize policy gradually—and reduce erratic market moves—if it waits longer than Thursday's meeting, he said.

"I would argue that the trajectory really matters," Rines said. "In a lot of ways if you delay too long, you have to get off the slow and steady path higher."

Motorcyclist ride by the Federal Reserve Building in Washington, DC.
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The Fed could raise rates by a quarter of a point on Thursday, but likely would not move again for the rest of the year, said Uri Landesman, president of Platinum Partners. Regardless, he expects "very tame language" that may not move markets significantly.

"I think it's a reasonable time to get in because there's so much bad news out there," Landesman said on "Power Lunch."

The Fed's waiting past Thursday would have a short-term positive effect, but likely would drag on markets moving forward, added Kristina Hooper, U.S. investment strategist at Allianz Global Investors.

"Don't be surprised to see the Fed move tomorrow," she said on "Power Lunch," adding that the central bank could hike rates by less than a quarter of a percent.

If rates rise, she would look to the technology sector, as it has historically shown strength in hike cycles.