Strategist Komal Sri-Kumar warns that the Federal Reserve has painted itself into a corner and has no other option but to significantly hike interest rates to get the sputtering U.S. economy back on a growth track.

Sri-Kumar founder and president of Sri-Kumar Global Strategies in Santa Monica, California,

“The Fed is stuck. It is not going to raise interest rates ahead of the November elections. Then it is time for Janet Yellen to consider whether she's going it be nominated or not,” he explained to CNBC.

"We're in for a long pass. Given how long stuck in low interest rate, there is no way out for this Fed,” said Sri-Kumar founder and president of Sri-Kumar Global Strategies in Santa Monica, California.

“The only thing to do is to raise rates significantly, accept a sharp correction in equity market, accept a U.S. recession and then remove some of the speculative furor over the last few years and go on with the economy … but the Fed is not willing to do that,” he said.

Sri-Kumar also warned investors, in a recent opinion piece on his firm’s website, that investors must watch their own backs to avert being trapped in a market collapse.

“In the US, markets are sharply discounting the chances of a September rate hike, with the likelihood of a December increase being reduced as well. Keep the party going, the music is still on!,” he said.

“But how will the party end? Central bankers are not going to be the ones to burst the bubble through tighter monetary policies. As the bang to economies from each additional buck of liquidity diminishes further, investors will find that rising equity prices are no longer supportable even with rising liquidity," he said.

"As valuations keep rising with slowing economies and falling corporate profits, the party will likely come to a sudden end -- much as equity prices crashed in 2000 – 2001, and equities and US house prices plunged in 2008. As in past crashes, don’t expect warning bells to ring to tell you to get out in time!” he said.

Sri-Kumar isn’t alone in his warnings about rising rates.

Former Federal Reserve Chairman Alan Greenspan forecast that interest rates will begin rising soon, perhaps rapidly.

“I cannot perceive that we can maintain these levels of interest rates for very much longer,” he told former Securities and Exchange Commission Chairman Arthur Levitt in a Bloomberg Radio interview.
 

“They have to start to move up and when they do they could move up and surprise us with the degree of rapidity which may occur,” Greenspan added.

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