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Mohamed El-Erian: Federal Reserve is torn

The Federal Reserve is torn about whether it is leading the stock market or does it react to it, but it is clear the central bank is worried the market has been underestimating the probability of a rate hike, Allianz's chief economic advisor, Mohamed El-Erian, said Wednesday.

The Fed released the minutes from its April meeting Wednesday, which show it will likely raise interest rates in June if economic data points to stronger second-quarter growth as well as firming inflation and employment.

"Moves in financial conditions as a whole are making them more confident about going forward and they were worried that the markets were underestimating the possibility of a rate hike this year and they wanted to do something about it," El-Erian said in an interview with CNBC's "Closing Bell."

If it weren't for the so-called Brexit vote, when British citizens vote on whether to stay in the European Union, he thinks the Fed would hike as soon as June. The vote comes on June 23, shortly after the U.S. central bank's meeting.

He believes July is a definite possibility, despite the fact that there is no news conference scheduled for after the meeting.

In the end, what's clear is a hike will definitely happen this year, he said. And when that occurs, he expect moves in the dollar, which will impact things like oil and other commodities.

"If the Fed unambiguously signals that it will move, you will see a stronger dollar and that … will have consequences on other markets," El-Erian said.

Dorothy Weaver, former chair of the Atlanta Fed's Miami branch, also isn't banking on a June hike, especially because there is a meeting again in July.

"[There is] no reason to jump the gun on it because there could be uncertainty following [the Brexit vote]. Might as well get all the cards face up on the table before you show your hands," she told "Closing Bell."

She would pay particular attention to what Fed Chair Janet Yellen, Vice Chairman Stanley Fischer and New York Fed President William Dudley all have to say before the June meeting.

She believes they will be "sending very intentional guidance to the market so we need to be listening."

Stephen Guilfoyle, managing director of floor operations for Deep Value, has a feeling the hike is coming in June.

However, that doesn't mean he is jumping into banking stocks, which reacted positively to the release of the minutes, because he's not sure if he trusts what the Fed said just yet.

"Retailers have been beaten down, technology has been beaten down. I think you're going to get better value elsewhere right now," he told the show.

"If you want to get into the banks maybe you want to buy one, maybe you want to play some options. I don't think you want to jump in with both feet just yet."

— Reuters contributed to this report.

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