The Fed on Wednesday raised its benchmark interest rates by 25 basis points — its fourth hike in 2018 and the ninth since December 2015 when it started rolling back post-crisis stimulus. The central bank projected it would enact two interest rates increases in 2019, which was down from a previous forecast of three, but that wasn't enough to appease investors who had hoped the Fed would ease even further off its tightening path.
But for Heller, who said he favors "even tighter policy," the Fed did exactly what it had to.
"The Fed is really in a sweet spot right now: Growth is good, unemployment is very low at 3.7 percent and they're roughly at their target of 2 percent inflation. So, what could be better?" Heller told CNBC's "Squawk Box" on Thursday.
"They have to continue on their path of taking away the accommodation and get into a neutral stance and that's exactly what they did," he added.
Heller was a member of the Fed's Board of Governors from 1986 until 1989.