Nobel laureate economist Robert Shiller of Yale University says the Federal Reserve should hike interest rates to pop speculative “new normal” bubbles in the housing and stock markets.

"I'm thinking they (Fed policy makers) ought to be considering that, because that is the mistake they made in the past," the Yale University professor told CNBC Europe when asked whether he believed the Fed should raise interest rates soon or later on.

"They didn't deal with the housing bubble that led to the present crisis. There's a suggestion in my mind that they should be raising rates now, (but) unfortunately the latest news looks a little weak on the demand side," Shiller said.

"If I was asked to testify before them (the Fed) I might reconsider, but there is a tendency for central banks to ignore speculative bubbles until it's too late," said Shiller.

"It may already be too late. Stock markets in the U.S. are quite high and prices in the real estate market are getting high," he said.

“There are places in the United States that are really in bubble territory. For example, San Francisco [real estate] is hot, hot, hot. They’re going way over the asking price. Every house sells quickly,” he said.

"I call this this the 'new normal' boom — it's a funny boom in asset prices because it's driven not by the usual exuberance but by an anxiety," said Shiller.

"This is an anxiety driven world — the whole world is driven by anxiety. It is anxiety about the aftermath of the global financial crisis, it's anxiety about inequality and about computers replacing jobs," he said.

But other experts don't see such a gloomy ending to the recent market surge — at least not yet.

The six-year bull market in stocks still has a little room to run, but not much, says star investor Jeremy Grantham of GMO.

The market is "still not bubbling yet, but I think it will," he writes in a quarterly commentary.

"The key point here is that in our strange, manipulated world, as long as the Fed is on the side of a strong market there is considerable hope for the bulls."

In light of the Federal Reserve's policy statement Wednesday, most economists don't expect it to raise interest rates until at least September.

"It seems logical to assume that absent a major international economic accident, the current Fed is bound and determined to continue stimulating asset prices until we once again have a fully-fledged bubble," Grantham says.


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