Art Cashin warns the Fed: 'Wake up,' the economy isn't as good as it looks

• Art Cashin says he doesn't expect another interest rate hike this year.
• He says the Fed needs to "wake up" because the economy isn't as good as it looks.
• "It's not that the economy is on life support but it's certainly not robust," he says.
• The Federal Reserve announced a quarter-point rate hike Wednesday as expected.

Closely watched trader Art Cashin doesn't believe the Fed's assurance that it plans to raise interest rates at least one more time this year.

"The Fed is going to have to wake up. I don't think the economy is as good as it looks," UBS' director of floor operations at the New York Stock Exchange said Thursday on CNBC's "Squawk on the Street." "The inflation numbers were not good. Retail sales were not good."

Cashin spoke one day after the Fed approved its second rate hike of 2017 amid indications that inflation is running well below the central bank's target.

The Fed said inflation likely will fall well short of its 2 percent target this year. The post-meeting statement said inflation "has declined recently" even as household spending has "picked up in recent months."

Still, the Fed reiterated its federal funds rate forecast on Wednesday, saying it still expects its benchmark rate to reach 1.4 percent by the end of 2017.

U.S. stocks were trading lower on Thursday as investors digested the Fed's decision to raise interest rates and its new plan to shrink its balance sheet. Large-cap technology stocks were also facing renewed pressure.

"It's not that the economy is on life support but it's certainly not robust," Cashin said. "It's not ready to do a marathon yet."

Traders tracked by the CME don't expect the Federal Reserve to raise rates at its September and December meetings. According to the CME FedWatch Tool, traders expect the next rate hike to come in March 2018.

On politics, Cashin said reports on Robert Mueller's obstruction of justice investigation has factored into the market's downturn Thursday. He said people are concerned it will further deter President Donald Trump's agenda.

"Washington is going to be occupied with the investigation, and we won't get to see tax reform, we won't get to see any of the things that they were hoping for," Cashin said.

Cashin also said it's important to check in to see if oil gets its act together. "If oil sells off again and breaks $44, it will have a very negative influence on the market."

—CNBC's Jeff Cox and Christine Wang contributed to this report.