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Very little chance of avoiding recession during Fed tightening: Boockvar

  • There is "no question" the Federal Reserve is tightening its monetary policy as U.S. economic expansion slows, analyst Peter Boockvar said.
  • He believes that while it is the wrong time to be doing it, it still needs to be done.
  • Historically, tightening cycles lead to recession, Boockvar said, and he has no reason to think this is going to end differently.

The Federal Reserve is tightening its monetary policy as U.S. economic expansion slows, but while it is the wrong time to do it, it still needs to be done, analyst Peter Boockvar told CNBC on Wednesday.

"There is no good time to reverse extreme policy," he said, noting that it is now the ninth year of the expansion and GDP growth in 2016 was just 1.6 percent.

"Unfortunately there's going to be very little chance of avoiding a recession through this tightening cycle. Historically, tightening cycles lead to recession and I have no reason to think this is going to end anywhere different," the chief market analyst at The Lindsey Group and a CNBC contributor said in an interview with "Closing Bell."

In June, the Fed raised interest rates and outlined a plan to shrink its $4.5 trillion balance sheet.

Minutes from the meeting released Wednesday indicated officials believed the balance sheet could be reduced with "limited" disruption to financial markets. Boockvar, however, doesn't buy it.

"They think by communicating to us what they're going to do, that somehow is going to limit any impact," he said. "That's not going to be the case. I think it's disruptive regardless of how many times they tell us they're going to do it."

Fed officials were divided on when the balance sheet runoff should begin, and did not release a timetable on when it would happen.

— CNBC's Jeff Cox contributed to this story.