Federal Reserve Vice Chairman Stanley Fischer told CNBC on Wednesday the financial markets are underestimating the trajectory of future interest rates.
"We watch what the market thinks, but we can't be led by what the market thinks," Fischer told CNBC's "Squawk Box." He added that market expectations of the number of future rate hikes are "too low."
According to the December median predictions from central bankers, the Fed may increase rates four more times this year.
"Those numbers are in the ballpark," Fischer said, but acknowledged the markets could be correct in projecting fewer hikes in 2016, given international uncertainty over North Korea, the Mideast and China.
He said the Fed has a road map, but it plans to react to events as they develop. "We have a goal of 2 percent inflation and 'maximum employment,' which we interpret as the natural rate of unemployment. People think it's somewhere around 5 [percent], possibly a little bit below. That's how we're going to be guided. We want to get there, and we want to get there without creating big messes in the markets."
Even with rates going up, he said the Fed will remain somewhat accommodative while inflation remains below 2 percent. "Those changes are rather subtle."