The market got too complacent on rate hikes: BlackRock

Moves in short-term interest rates suggest the market has underestimated the Federal Reserve's ability to hike rates this year, BlackRock's chief investment strategist for fixed income said Tuesday.

The U.S. 2-year Treasury hit a roughly three-week high of 0.82 percent on Tuesday. That is a sign investors now believe they became too complacent in their opinion the Fed would not deliver two 25-basis-point increases this year, BlackRock's Jeff Rosenberg said.

"This is a Fed that is still talking about two increases and the bond market barely has 18 basis points priced in for the entirety of 2016," he told CNBC's "Squawk on the Street."

Rosenberg said the risk that investors underestimated the Fed was underscored on Tuesday by data that showed consumer prices in April recorded their biggest gain in three years.

It may be too late for the Fed to put a June rate hike on the table, but July and September could be in play, he said.

Jason Pride, Glenmede director of investment strategy, said Tuesday the inflation figure to watch is wage growth. Despite weak corporate profits and tepid economic growth, wage pressure is rising as businesses are unable to match qualified candidates to open positions, forcing employers to pay a premium for talent, he said.

In April, wages increased 2.5 percent on an annualized basis, the Bureau of Labor Statistics reported.

Wage growth is now seeping into other inflation measures and keeping pressure on the Fed to raise rates, he said. The current level of wage growth is enough to substantiate one or two rate hikes this year, he told "Squawk on the Street."