Dallas Fed President Robert Kaplan believes it's time for the central bank to pull back on its aggressive easing policies.
In a CNBC interview, Kaplan said the Fed should move "sooner rather than later," a phrase he has been using in recent days to indicate that rate hikes this year are appropriate.
"I actually think we're now much closer to meeting our employment and inflation objectives," he said on "Squawk Box." "Once you've decided that, you need to take advantage of those windows when they present themselves."
Recent days have seen the market start to price in a higher probability that the Fed will hike in March. While some measures indicate a 50 percent chance of a move, the CME's tracker puts the possibility closer to 31 percent.
Kaplan said he believes market-based measures are probably close to correct, though he wasn't specific about timing the increase.
"I don't think the exact timing is the most important thing. I think the path of rates is," he said. "In that regard I think the market is probably in the neighborhood of where we're heading."
On other issues, Kaplan expressed some optimism regarding changes expected from the new administration.
President Donald Trump has promised a slew of measures aimed at pulling the U.S. out of its subpar growth path since the financial crisis ended. Among those plans are increased domestic spending on infrastructure projects coupled with lower taxes and a rollback in regulations.
Those things "could have positive impacts" particularly on productivity, Kaplan said, though he cautioned against policies that might slow immigration. He said growing the labor pool is important as the workforce ages and productivity slows.
Kaplan also addressed the below-the-radar issue of when the Fed will start reducing the size of its $4.5 trillion balance sheet.
Wall Street has been buzzing lately with talk about when the central bank will start to roll off the Treasurys and mortgage-backed securities it acquired during three rounds of "quantitative easing" aimed at boosting the economy.
However, Fed officials have been fairly quiet on the issue. Some market experts worry that when the Fed starts shrinking its balance sheet it will push up interest rates. Kaplan said the balance sheet reduction won't start until the Fed is "well underway" in terms of raising rates.
"We'll have to get a little further along, then we should let the balance sheet run off in a ... gradual way, for me in a way that doesn't unduly affect the markets," he said.