However, McTeer admitted that bad luck and unfortunate timing has compounded the current undesirable circumstances. He told CNBC that "as soon as they took the first step [to tighten], international developments overwhelmed the situation." At that time, China's slowdown became more pronounced, upsetting markets.
McTeer further believes that the Fed's delay enabled other central banks—from Japan to the European Central Bank—to enact negative interest rates, a policy move with which he disagreed.
Now, with international markets in crisis, McTeer says Fed chair Janet Yellen needs to take a more proactive approach in addressing global concerns. The former central banker advised that "she should probably show more concern [related] to recent market turmoil" when speaking in the future.
Read MoreQE QB: Fed sees 'through Wall Street's eyes'
On Friday, international markets saw a sell-off in Asia where the Nikkei dropped 4.8 percent to 14,952, its lowest close since October, 2014. Additionally, the yen ended the week down 11 percent, unwinding some of the massive flight to safety buying that has recently boosted Japan's currency. The Dow Jones Industrial Average, S&P 500 Index and Nasdaq all posted big gains, and snapped a five day losing streak.
At the same time, the market's latest mantra has become negative interest rates, which have been introduced in Japan and Europe. Earlier this week, Yellen refused to rule out the policy move for the world's largest economy, but acknowledged the issue needed more study.
Negative rates, however, is an idea McTeer does not endorse.
The central bank "is not going to do it, but furthermore they can't do it," he noted, speaking of the Fed's next potential move.
In McTeer's interpretation, negative rates are not an options because the Fed has adopted a new mechanical procedure for establishing the Fed funds rate, which is the interest rate that banks use to calculate overnight loans to other institutions. The rate currently calls for a positivity on bank deposits. McTeer believes that if the Fed tries to go negative, it would take years to re-work the system.