Economist Rupkey: Fed Should Raise Rates This Month

Many economists say Friday's strong November jobs report will help push the Federal Reserve to begin raising interest rates around mid-2015.

But Chris Rupkey, chief financial economist at Bank of Tokyo Mitsubishi, thinks the Fed should act much sooner than that.

"Our call is for a rate hike in March 2015, but our recommendation is for them to raise rates in December," he writes in a commentary obtained by CNBC.

"The economy is better than they think. And by raising rates, the Fed tells the country and the world too, that the economy has fully recovered. A rate hike will boost the nation's confidence that the economy is heading in the right direction and the outlook is a solid one."

The Fed has kept its federal funds rate target at a record low of zero to 0.25 percent for six years. As for the employment data, payrolls soared 321,000 in November, an almost-three-year high.

"The economy struck gold this morning," Rupkey states. "What is the Fed doing leaving interest rates at zero still?"

Meanwhile, Tad Rivelle, chief investment officer for fixed income at Trust Company of the West, warns the Fed against waiting too long to boost rates.

"If the Fed is willing to recognize that its policies cannot dictate economic realities, then we should expect the rate rises to begin fairly soon, presumably in 2015," he writes in a commentary on his firm's website. While that would bring pain sooner, it would make the deleveraging mild, Rivelle says.

But, "if the Fed is unwilling to remove the punchbowl, . . . it is the capital markets themselves which call the code red," Rivelle says. "In that event, expect a violent de-leveraging."

Related Stories:

• David Stockman: Yellen's 'Bathtub Economics' Is Producing a Cold Bath for the US
• Gundlach: Fed May Raise Rates Next Year 'Just to See What Happens'