Provided there are no known health problems then this is not too close, as the dog's father is the bitches grandfather. This is called line breeding, rather than inbreeding, and is often used to keep to the same type.
I would tell the breeder your plans though, so they are aware in case they know of any inherited problems.
And of course, don't expect the dog to leave the bitch alone for three years when she is in season! You can get her jabbed to stop her coming in season, have a chat with your vet. Please be careful though, dogs (and bitches!) are remarkably clever at getting to one another. Unless you desperately want to breed from her, then why not consider having her spayed, this will make your life a lot easier, and you can always go back to the breeder for another puppy when you want one, or even offer your dog back to the breeder at stud.