The Federal Reserve could create a bigger splash than some market watchers think if the central bank's policymaking committee raises interest rates next month, former White House Chief of Staff Bill Daley said Tuesday.
"Some people think it's baked in, a response is already baked in, people expect it. I'm not sure. I think the reaction will be a little bit more dramatic," the former Obama administration staffer told CNBC's "Squawk Box."
Daley, who was commerce secretary under Bill Clinton, now heads the U.S. operations for Swiss hedge fund Argentiere Capital.
If an initial 25-basis-point rate increase causes an over-the-top market reaction, it may create the impression the U.S. economy is in worse shape than people think, Daley said.
"We're healthier than anybody else in the world, but is that saying a lot? We'll find out at least what the Fed's opinion is pretty soon," he said.
The central bank's Federal Open Market Committee meets Dec. 15 and 16. The CME's FedWatch tool, which measures the market's expectation for a change in U.S. monetary policy, puts the chances of a December rate hike at 48 percent.