The federal funds rate now stands at 2 percent, a 40-year low.

"Those rates have to back up if the funds rate doesn't move lower."

"I look for the funds rate to be at 9.5 percent by the end of the week," he said.

In theory, all other interest rates are based on the funds rate.

That would be higher than today's federal funds rate, perhaps about 4 percent.

By late in the day the funds rate was trading at around 7 1/16 percent.

At the close, the funds rate moved back up to 9 1/4 percent.

"But we have a long ways to go on the funds rate," he added.

"And we expect the funds rate to remain in that range for the next four or five months."

"In short, the lower end of the range for the funds rate has not been defined yet."