Jim Grant: We're already in a recession

The market was expecting Fed Chair Janet Yellen on Wednesday to indicate that the central bank will reverse its course, Jim Grant, founder of Grant's Interest Rate Observer, told CNBC's "Closing Bell" on Wednesday.

Yellen appeared before Congress for semiannual testimony. Yellen told the House Financial Services Committee that she doubts that it'll be necessary to cut back interest rates, despite global economic concerns.

"I think that the Fed was trying to do the right thing, but it turned out to be the wrong time," Grant said. "I think the Fed missed its market."

Global growth concerns have impacted the markets, but Grant says the U.S. is already in a recession.

"I think we are in one," he noted. "I think there's a defensible case to be made that a recession began late last year."

Grant, who previously said that the Fed will be forced to backtrack on its December rate hike policy, noted that the central bank doesn't control all rates. He says that it "influences all" rates, and it's been for the downside for many years. Grant says that the consequences of that influence is the "mispricing of risk and misallocation of capital."

Meanwhile, Japan recently implemented a negative rates policy and the Fed factored in hypothetical negative yields on U.S. Treasury securities for the 2016 cycle stress test; these events fueled market watcher's to think that negative rates may soon hit the U.S.

While Yellen admitted that the Federal Open Market Committee has looked at this possibility in the past, she said that the committee hasn't looked into whether that would be legal in the U.S., yet.

"Radical monetary policy begets more radical monetary policy" Grant said. "I think that's what the markets are afraid of."

But implementing negative rates is not a good thing, Grant said. He thinks that the repercussions of this policy will have severe implications for the banks that opt to implement it.

"It is a confection of the formerly tenured academics who run the central banks," Grant said about negative rates. "They have indeed imposed it in Europe, with consequences that I'm sure will be just as unhappy as the consequences of zero rates are now being shown to be."