Ex-Fed official: Central Bank should bring more uncertainty

Former Fed official: Fed hostage to Wall Street

Financial markets have been jittery, closing lower Monday as traders keep a close eye for clues on whether Federal Reserve will raise interest rates this week.

But, although the markets begged chair Janet Yellen for a clear agenda, one expert said the Fed needs to introduce more, not less, uncertainty into the interest rate hike decision.

Read MoreConsumers may have just blocked a Sept rate hike

"The Fed is hostage to financial markets," Andrew Huszar, former Federal Reserve of New York official, said Monday on CNBC's "Closing Bell." "The Fed's job has historically been to monitor the markets, but it expanded its role into a lot of markets dramatically in a short period of time .. It's forced the fed to solicit a lot more input from market participants."

Though Huszar said he would be "shocked" by a rate hike on Thursday, he thinks rates should have been raised months ago.

"There is real debate within the Fed about the benefit to the economy," Huszar said. "The cheap funding is causing a lot of unproductive games in the markets.... The easy money policies really aren't making a meaningful enough impact for Main Street, compared to the costs."

Hands up for a rate hike?
Investors push Fed: Go now, go big
Dan Greenhaus
Why we changed our mind on Sept rate hike: BTIG strategist
Richard Kovacevich
Why the Fed should hike now: Dick Kovacevich

Huszar's said the real economy has failed to benefit from tools like quantitative easing, and that more uncertainty might force investors to rethink their strategies.

To be sure, not everyone agrees with Huszar's assessment. Former Treasury Secretary Larry Summers said last week that fueling uncertainty wouldn't be a "prudent" risk for the Fed to take.

Still, Huszar said there's a larger conversation needed about the culture surrounding the Federal Reserve.

"A lot of the issue with the Fed is a hyperacademic understanding of the markets," Huszar said.

Read More Rate hike now doesn't seem a prudent risk to take: Summers