Market crash still two years away but a 'nasty' 10 percent correction in the offing, says strategist

• "I think interest rates are not going to end up going up that little bit faster than people think… and that will cause a market correction," said Giles Keating, chairman at the Werthstein Institute.
• Expectations for another Fed rate hike in December are around 48 percent, according to the CME Group's FedWatch tool.
• When asked to quantify how much of a market correction investors should expect in the final quarter of 2017, Keating replied, "Call it 10 percent."

A trader works on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, U.S., March 22, 2017.

Lucas Jackson | Reuters

Investors should be prepared for a "nasty" market correction in two months' time as central banks appear set to stick with low interest rates for longer than expected, a former prominent Credit Suisse research head told CNBC on Monday.

"I think earnings are OK, I think the economy is OK but I think interest rates are not going to end up going up that little bit faster than people think… and that will cause a market correction," said Giles Keating, chairman at the Werthstein Institute.

While Keating stressed that this does not necessarily mean the end of Europe's bull market, he did forecast a "nasty correction" in approximately eight weeks' time.

The dollar had slumped to its lowest level against the euro in more than two and a half years on Wednesday, as doubts about another Federal Reserve rate hike increased. St Louis Federal Reserve President James Bullard said he would be opposed to further U.S. interest rate increases and warned future hikes could hamper the central bank's 2 percent inflation target, Market news International reported on Wednesday.

Expectations for another Fed rate hike in December are around 48 percent, according to the CME Group's FedWatch tool.

Meanwhile, the European Central Bank (ECB) is widely expected to scale back its quantitative easing (QE) program in 2017. However, ECB President Mario Draghi said last month that there was still a long way to go before the central bank could call a halt to its economic stimulus program.

'Call it 10 percent'

"I think a crash is still two years away… but I think a decent correction is two months away," Keating added.

When asked to quantify how much of a market correction investors should expect in the final quarter of 2017, he replied, "Call it 10 percent."

In contrast to Keating's projections, the closely watched Wharton finance professor, Jeremy Siegel, told CNBC last month that he could see plenty of reasons for the market to keep on rallying.

The perennial bull pointed to better-than-expected earnings and global growth as reasons for investors to remain optimistic.