Concern among U.S. policymakers about the reliability of fiscal policy proposals is growing as markets reach new highs on expectations of economic stimulus from the Trump administration, Morgan Stanley economist Ellen Zentner told CNBC on Thursday.
"When I'm meeting with policymakers, there's this undercurrent of discomfort," Zentner told "Squawk on the Street." "They've become more upbeat on the outlook, but they know a lot of it hinges on ... that fiscal stimulus coming through, and they're uncertain how much market sentiment may be built on a house of cards."
Zentner, Morgan Stanley's chief U.S. economist, said that if Congress is unable to deliver on fiscal policy quickly, investors may become less eager to buy, sending the market into a slump with monetary policy from the Federal Reserve being one of the few lifelines.
"Some of that risk appetite can unwind, and the Fed knows it can unwind in a disorderly way," she said. "So the Fed should maintain a tightening bias even if fiscal policy was never delivered," especially with the domestic economy growing steadily at a 2 percent rate, she said.
But policymakers, not the Fed, will have to answer to consumers if they end up taking a hit from unsuccessful fiscal policy, Zentner contended.
"We have borrowed some activity from the future. We can see consumers already front-running assumed tax cuts. If you don't deliver on those, there's a payback coming, and as a policymaker you have to be wary of that," she said.
The economist said she expects two rate hikes from the Fed this year, both in late 2017.