The Good And The Bad Of The Fed's Interest Rate Policy

The Federal Reserve sent a dovish message to markets last week, removing the word "patient" from its statement. As a result, the equity markets have moved up, while the dollar index is slumping.

Peter Fisher, BlackRock Investment Institute senior director and senior lecturer at the Tuck School of Business at Dartmouth, was on CNBC Monday to weigh in on Fed's policy and discuss why Fed's path for funds rate was too high.

Zero Is The Wrong Number

"I think the Fed has been targeting asset price levels for half of a decade now, and I think investors have got habituated to that. I look back at what happened last week," Fisher said. "I think some things make sense, some things don't make sense.

"What makes sense is the Fed moved a step closer to being able to raise rates. It also made sense that the Fed lowered its path for the funds rate. Their path for the funds rate was too high given how low inflation is. But zero is the wrong number."

Creating Immaculate Tightening

He continued, "What doesn't make sense, and I guess I in part agree with President (Stanley) Fischer, the market chose to rally on that. Now, unfortunately, I think the chairman also encouraged them. Janet Yellen is still trying to create an immaculate tightening in which they are going to raise rates, but no one's expectations are going to be changed. Nothing will happen in the world. And I think the Fed is trying a little too hard for that.

"So, I think I'll split the difference with President Fischer. I think the Fed still implicitly targeting asset prices and the market's going to have to have a opinion of its own pretty soon," Fisher concluded.