Scott Minerd, Guggenheim Partners Scott Mlyn | CNBC

The Fed is about to embark on a rate cutting cycle that could stoke asset bubbles, forcing it to later cut interest rates back to zero or even negative levels in the future, according to Scott Minerd, global CIO at Guggeheim. Minerd expects the Fed to cut interest rates by a quarter point Wednesday, but he says the economy is much more in need of better fiscal policy than easier monetary policy. Fiscal policy is not addressing income inequality and other structural issues that are constraining out put and depressing prices. "The Federal Reserve at the end of the day is combating recession. The only thing it can possibly do is inflate an asset bubble that ultimately is going to unwind and create a problem that is bigger than the one they face today," said Minerd in a phone interview with CNBC.

"Monetary policy is not going to address the ills in the economy which are more supply-side related. Whether we go straight into a recession from here or the Fed manages to reflate the economy...we're going to end up in the same place. Maybe it can buy some time but the mop up period, if we have a period of accommodation, would be worse than if we went into recession right now," he said. Minerd said he believes the Fed should cut rates but make it clear that it is just a preventative measure. In a Barron's op-ed this past weekend, he said that normally, by almost every measure, the Fed should be considering a rate hike, not a rate cut, in anticipation of "potential economic overheating from looming limitations on output." The Fed has made a case, however, for a pre-emptive rate cut and the market widely expects a 25 basis point cut. Some economists see the potential for a cut of 50 basis points, and more rate cuts beyond that.

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