So while consensus is forming around the notion that the Fed’s policymaking committee will raise rates in December, Ricchiuto said the central bank may hold off.
The Mizuho Securities chief U.S. economist told CNBC’she believes Yellen is looking to break with the easy money policies of predecessors Ben Bernanke and Alan Greenspan that were aimed at propping up ailing stock markets. Those approaches created financial market disruptions, Ricchiuto said.
“I think the markets want to be spoon fed information,” Ricchiuto said. “I think what Janet Yellen is trying to do is inject back uncertainty into the decision process, so when people make investment decisions, they have to begin taking risk on board.”
Ricchiuto said investors are indeed beginning to do just that. He noted that corporate spreads have been widening because companies are beginning to take on debt, a sign that the market is beginning to price in risk once again.
He said the Fed is unlikely to raise rates in December because inflation expectations are low in the United States, disinflationary pressures are building around the world, recent economic data have been weak, and the U.S. dollar remains strong.
Thetool, which tracks 30-day fed funds futures prices, puts the chance of a December rate hike at 78 percent.
Richard Steinberg, co-founder at Steinberg Gloal Asset Management, said the Fed risks losing face and creating market anxiety if it doesn’t raise rates next month. The uncertainty injected into markets by recent geopolitical events — most recently the downing of a Russian fighter jet by Turkey near the Syrian border — only raises the stakes, he added.
“If the Fed doesn’t step up to the plate, investors are going to be questioning what do they know that we don’t know, and that would spook things,” he told “Squawk Box.”