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How Fed should respond to market diss: BlackRock

As the Federal Reserve concludes its January interest rate meeting and releases its policy statement Wednesday afternoon, the central bankers need to "thread the needle" on their forward guidance, BlackRock bond guru Jeff Rosenberg told CNBC.

On one hand, the Fed should address the financial market turmoil that's putting in doubt policymaker projections for four more rate hikes this year, Rosenberg said in a "Squawk Box" interview.

"[But] they can't be seen to lose credibility on normalization by so quickly going back against that," the BlackRock chief investment strategist for fixed income added.

Read MoreFed must close gap on rate hike expectations: JPMorgan

The Fed in December increased the cost of borrowing money for the first time in more than nine years. But with the new year stock market correction on concerns about plunging oil prices and what slowing growth in China might mean for the U.S. economy, expectations for 2016 rate hikes were being severely scaled back from the four suggested by policymakers.

"The bond market is expecting barely one hike. There's a bigger gap here," Rosenberg said. "But the Fed has to be careful about how much it acknowledges that dovish sentiment, because they just gave you confidence and were validating their normalization plan."

"There's not a lot of room for error," he added. Noting that this Fed gathering will end with only a statement rather than a news conference by Fed Chair Janet Yellen, Rosenberg said: "This meeting usually doesn't have a lot of attention. I'd say it has a little bit more market significance because of the difficult communication challenge."

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