Ron Insana: Why the Fed Won't Raise Rates Next Year

After the Federal Reserve's hawkish policy statement Wednesday, many economists returned to their forecast that the Fed will begin raising interest rates around mid-2015.

But CNBC contributor Ron Insana begs to differ. "I am beginning to believe the Fed may not raise rates at all, at least in 2015," he writes in his newsletter "Insana's Market Intelligence," provided to Yahoo.

So why does Insana see the Fed abstaining on rate hikes next year?

• Fear of 1937. That's when the economy re-entered recession after the Fed tightened policy five years after the Great Depression.
• Dollar domination. "A stronger dollar is an implicit tightening of monetary policy, relieving the Fed of some pressure to raise rates sooner, rather than later," Insana notes.
• Commodity crunch. Falling commodity prices will put downward pressure on inflation, again alleviating the need for the Fed to act on rates.
• Slow/no global growth. The slow growth in the rest of the world could spill over into the United States.
• Geopolitical risk. Global military turmoil threatens world economic growth.

"If I am right, such a prediction will have enormous implications for the stock and bond markets here at home and many markets around the world as well," he explains.

"Despite the repeated cries of the Fed bashers, the inflation hawks, the dollar bears and the gloom-and-doomers, I believe the Fed will stay the course for some time to come . . . at least until it is quite clear to them that the above-mentioned factors will cease to be a restraint of the Fed's goal of getting nearly everybody back to work, and engineering enough growth that inflation grows in a manner consistent with its mandate."

Meanwhile, the Fed's decision to end quantitative easing may ironically end up causing the Fed to revive the program later on, says Peter Boockvar, chief market analyst of The Lindsey Group.

That's because the completion of the Fed's new bond purchases, which totaled $85 billion a month last year, could send the stock market reeling, he tells MarketWatch.

"QE has been most effective in inflating asset prices, and both the markets and economy are addicted to the stimulus," Boockvar notes. "Without it, we will see a big adjustment." If stocks plunge 20 percent, the Fed will surely bring quantitative easing back, he said.

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