Federal Reserve

Expect Fed to hike in September: Expert

Anticipate Fed rate hike in September: Citigroup

The Federal Reserve is more market dependent than data dependent and won't likely raise interest rates until September, Citigroup's William Lee said Monday.

Despite the fact that the central bank's April meeting minutes said an increase could occur in June if economic conditions warrant, Lee doesn't think the Fed said anything different from what it's been saying all along.

"They only put in June to say that 'we're ready if things are OK,'" he said in an interview with CNBC's "Closing Bell."

He believes the market, which is only pricing in a 30 percent probability of a June hike, would have been convinced if the Fed did what it did in October, just before hiking rates at its December meeting. Back then, members said it was appropriate to move at the next meeting, and that was in the Fed statement following the meeting. Nothing about a potential June hike was mentioned in the statement following April's meeting.

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The Fed has said a rate hike would be determined by economic data. However, even if it looks like the economy is turning around and the numbers suggest things are on track, market uncertainties could still pull things off track, said Lee, who is head of North America economics for Citi.

"This Fed is much more market dependent than they are data dependent. They are so concerned that markets get riled up that they will not move if the volatilities in the markets are anywhere near where they were in September and January," he said.

The key is what Chair Janet Yellen has to say because the doves who have been behind stalling on hikes haven't been heard from yet, added Lee. And he doesn't believe she'll address policy in the two speeches she has scheduled before June's meeting.

Time to invest in financials?

A Fed rate hike should be good for banks, but investors need to be selective, strategist Fred Cannon told "Closing Bell" Monday.

For a long time he's believed that there wouldn't be profitability for the banks from somewhat higher rates because of credit pressure. However, banks are now seeing loan growth accelerate.

"If you get a rate hike and loan growth, for select banks it can be a positive," he said.

Therefore, investors should chose banks that can really benefit from increases in the short end of the curve. He specifically likes Wells Fargo and SVB Financial Group.

CNBC's Crystal Lau contributed to this report.

Disclosures: KBW does investment banking with SVB Financial Group and Wells Fargo. KBW makes a market in SVB Financial Group and Wells Fargo.