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Fmr Fed prez McTeer: Markets are overthinking rate hike

The markets are overthinking an anticipated interest rate hike and central bankers need to simply get it out of the way, former Dallas Fed President Robert McTeer said Thursday.

"The market have been obsessing over this for a long time, and we've had an emergency monetary policy for a long, long time, and there's no emergency anymore," McTeer told CNBC's "Squawk on the Street". "We just need to get it over with."

McTeer acknowledged that it's not an ideal time for the Federal Reserve to embark on its first interest rate increase in more than nine years. But he said there will never be an ideal time.

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The Fed has held its benchmark fed funds rate near zero since December 2008. At 2 p.m. EDT Thursday, the Federal Open Market Committee will announce whether it will begin a long anticipated normalization of monetary policy.

McTeer said liftoff would not derail the six-year-long economic recovery.

"People will learn that a quarter of a point on the fed funds rate in an economy that was last growing 3.7 percent, annual rate, is no big deal," he said. The Fed is widely expected to hike rates in 25 basis point increments.

Earlier Thursday, billionaire private equity professional David Rubenstein told CNBC's "Squawk Box" the Fed risks worsening an economic slowdown in emerging markets by tightening rates. Higher interest rates typically dissuade investment in the developing world.

Read MoreRubenstein: Why the Fed won't raise rates now

Joseph Sullivan, chairman and CEO of Legg Mason, also pointed to "challenging" global economic data and "fragile" stock markets, saying those factors may stay the Fed's hand.

Stock markets tanked in August after China devalued its currency, exacerbating concerns about global economic growth. The Vix, which measures the market's anticipation of future volatility, turned in its biggest monthly gain since 1990.

McTeer said the market had overreacted to China's devaluation, which he called "sensible" and "modest."

Former Federal Reserve Governor Mark Olson said Thursday he too believed it was time for the Fed to hike in order to begin clearing $3.5 trillion in U.S. bonds and other assets from its balance sheet after years of stimulus purchases.

A key question, he said, is whether Fed Chair Janet Yellen can secure a unanimous vote to raise rates.

"In this year, 2015, all of the votes have been unanimous. I think that she would want something close to that in order to move this time," he told "Squawk on the Street."

Read MoreCramer: Yellen Fed a 'cacophony of voices'

Kevin Caron, market strategist at Stifel Nicolaus, said the Fed should raise rates now because the unemployment rate is at 5.1 percent and falling rapidly.

The Fed is tasked with maintaining full employment and controlling inflation. When the unemployment rate falls below a certain point, wage inflation can set in as employers compete for a shrinking pool of workers.

"If the Fed does not move, then they could find themselves in a situation where they would be forced to have to move faster than what the market would expect, and you could actually end up with a more painful reaction by markets if they delay too long," he told "Squawk on the Street."

Central bankers have indicated they intend to increase interest rates gradually after the first move.