The Federal Reserve’s decision to stimulate the economy on an open-ended basis is dangerous because markets have no idea what consequences will unfold from such an unorthodox monetary policy, according to Robert Rodriguez, CEO of First Pacific Advisors.

The Fed recently announced it will buy $40 billion a month in mortgage-backed securities from banks to pump liquidity into the financial system in a way that pushes down interest rates across the broader economy to spur recovery, a monetary policy tool known as quantitative easing (QE).

The decision to juice the economy with QE marks the third time the U.S. central bank has resorted to the monetary stimulus tool since the 2008 financial crisis.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

Two previous rounds saw the Fed buy a combined $2.3 trillion in assets from banks in the last four years, but this round differs in that it will go on in an open-ended basis until unemployment rates fall and the economy grows.

Side effects to such loose policies typically include a weaker dollar, rising stock and commodities prices and mounting inflation, but with open-ended easing, the economy is so deep in uncharted waters that the policy is getting dangerous.

“It’s excessive, it’s dangerous and it’s untested. And it will lead to unintended consequences, this open-end policy of the Federal Reserve,” Rodriguez told CNBC.

“I call them cancers. Very much like prior to the last credit crisis,” he said, pointing to rate cuts at the beginning of the last decade that fueled a massive credit bubble.

“There were cancers developing in various areas of the credit market that were a function of unsound monetary policy in ’03, but you didn’t see it for several years. The same thing is happening with the Fed’s QE policy, particularly with this QE3, since it’s forcing investors to make what I would call riskier decisions,” Rodriguez said.

QE functions by injecting liquidity into the financial system to push down interest rates to encourage investing and hiring when cuts to benchmark lending rates alone don’t work.

As a result, interest rates fall and that, Rodriguez argued, could spur investors to take more risks in search of return.

“You are seeing some of these elements, such as discussions, let’s say about bond funds, extending and moving out in differences from their benchmarks,” he said.

“Or in Europe about money market funds having to move out and go down in credit.”

Some Fed officials themselves disagreed with the decision to roll out a third round of bond purchases, including Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, who said the move would carry very little benefits at all and apply upward price pressures across the economy.

“I dissented because I opposed additional asset purchases at this time. Further monetary stimulus now is unlikely to result in a discernible improvement in growth, but if it does, it’s also likely to cause an unwanted increase in inflation,” Lacker said in a statement.

“Unemployment does remain high by historical standards, but improvement in labor market conditions appears to have been held back by real impediments that are beyond the capacity of monetary policy to offset.”

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did