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The Federal Reserve hasn't taken more interest rate hikes off the table, but it's likely to be very cautious in the lead up to the US presidential election, Robert Heller, a former Fed governor told CNBC.

"The Fed itself says we'll have four more hikes, but I think they're afraid of their own shadow," Heller told CNBC's Street Signs.

"Whenever it comes to raising rates, they start to back up and they won't do it. So I wouldn't be surprised if there would be only two rate hikes. I expect two or three," said Heller, who was on the board of governors of the Federal Reserve System between 1986 and 1989.

Robert Heller's call followed the Fed's latest meeting Wednesday, where the central bank's statement fueled market expectations that its previously stated goal of about four interest rate hikes this year wasn't likely to come to fruition.

As widely expected, the central bank left rates unchanged but said it was "closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook."

Markets read the Fed's cautious tone on the economy and financial conditions as a sign it is not likely to hike rates in March. The market priced a 24 percent chance of a March rate hike after the 2 p.m. ET Fed statement, down from a 31 percent chance ahead of the release.

But while Heller expects the Fed to hike, he also noted it's facing a political time limit.

"As the year progresses, we get closer and closer to the presidential election," Heller said. "As we get right close up to the election, the Fed will be very, very leery of changing policy. August, September and then it's game over as far as I would expect."

Even with the time limit on Fed action this year, Heller also sees some reasons for the central bank to stay pat for a bit.

"We will get some not-so-good GDP (gross domestic product) numbers for the fourth quarter. I would expect it to be around 1 percent or thereabouts. So that will be another incentive not to do anything until we see some further strength," Heller said.

Estimates of US economic growth in the fourth quarter are around 0.8 percent, according to the CNBC Rapid Update, down two-tenths of a point from the previous forecast. The official reading on fourth quarter GDP is due on January 29.

"Industrial production in the United States has not been expanding very rapidly, not because of the Federal Reserve's fault," he said. "There's plenty of cash sitting around, but nobody wants to invest because of all that uncertainty: High regulations in the US and then the uncertainty of the election also coming up again."