Federal Reserve

Markets beginning to lose confidence in central banks, Jim Grant says

Jim Grant: The pretense of knowledge

After the Federal Reserve opted to leave interest rates unchanged Wednesday, Jim Grant told CNBC he believes the markets are beginning to lose confidence in central banks.

"I think the central banks are busy chipping away at the unwarranted faith in their pretense," the founder and editor of Grant's Interest Rate Observer said in an interview with CNBC's "Closing Bell."

The Fed was sharply divided when it opted to not hike interest rates at its September meeting. While Fed policymakers expressed confidence in economic growth in its statement after the meeting, they said there was not enough to make a move this month.

They also set up the likelihood of an increase before the end of the year.

"The central bankers insist on paying no attention to historical precedent and insist on turning away from the fact that this is an experiment where there is no known outcome," Grant argued.

He has long been a critic of the Fed's zero-rate interest policy, saying it has distorted asset valuations.

"Zero rates say there is trouble. They say there is something abnormal. There is something to worry about. This is a state of high anxiety perpetuated by the central bank," Grant told CNBC.

He said one of the issues is that there has been a "pretense of knowledge" on the part of the members.

"Among the voting members today, we have seven doctors of economics who basically have been taught the same things, who think in the same format, and I think that we are the prisoners of a very dubious set of pseudo-scientific pretensions on the part of the people who manage our monetary affairs," he said.

"They will find a way not to do something for reasons that cannot be enumerated," he said.