Rubenstein: Why the Fed won't raise rates now

The 'scariest of all things' for the Fed

Billionaire private equity professional David Rubenstein said Thursday he does not expect the Federal Reserve to raise interest rates at the conclusion of its two-day meeting.

The Carlyle Group founder and managing director said the Fed is typically good at telegraphing its moves, and it hasn't done so yet.

"The Fed is really the central bank of the world. If the Fed raise rates a little bit, it will have an impact all over the world, particularly in emerging markets," Rubenstein told CNBC's "Squawk Box."

"I think the Fed is sensitive to that, and I think therefore the Fed is likely to wait for another month or two to get additional data and probably telegraph a little bit better than it has now that it's about ready to do it at a particular time."

David Rubenstein, The Carlyle Group Co-Founder & Managing Director.
Adam Jeffery | CNBC

The Federal Reserve, which ends its two-day September meeting Thursday afternoon, has held interest rates near zero since December 2008. It has not raised its benchmark fed funds rate in more than nine years.

Emerging-market economies are slowing down significantly, and a Fed rate hike would probably increase the slowdown, Rubenstein said.

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Recent global economic data have been more "challenging" and present a case for the Fed to hold off on liftoff, said Joseph Sullivan, chairman and CEO of global investment management firm Legg Mason.

"Now, there are those who I think dismiss that, or don't think that the Fed considers that as much as I do. But I have to believe what we're seeing out of China and some of the other markets has to impact at least, or enter into the thinking of the Fed," he told "Squawk Box."

Sullivan said he hopes the Fed moves toward normalization of interest rates on Thursday, but said stock markets remain "fragile" at the moment. That, too, may stay the central bank's hand.

As for the private equity industry, sluggishness in emerging markets is not a problem because firms tend to buy when there's disequilibrium and uncertainty, Rubenstein said. The decline in the developing world might be a good opportunity for private equity, he added.

Rubenstein said he doesn't fear a rate hike either.

"For our business it really isn't going to be that cataclysmic or really that dangerous because the truth is when interest rates go up, prices tend to go down in public markets. Therefore prices are less expensive and it's easier to buy things," he said.

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The Carlyle Group, one of the world's largest private equity firms, has $193 billion in assets under management, according to its website.

At present, many private equity firms are finding it difficult to purchase assets because prices are too high, and that will change as interest rates begin to rise, Rubenstein said.

He said the real issue is not an interest rate increase, but credit availability, and he doesn't see that drying up.

Tax code shortfalls: David Rubenstein

Rubenstein also addressed proposals put forward by some GOP presidential contenders to close the so-called carried interest tax loophole, which allows hedge fund managers and private equity professionals to pay a significantly lower tax rate than other Americans.

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He said everything should be on the table in the context of comprehensive tax reform.

The tax code is currently "replete with a lot of with redundancies, a lot of mistakes, and a lot of inequities" because reform hasn't been tackled in a comprehensive manner, Rubenstein said.