Fed’s Williams: Likely to start normalizing balance sheet this year

San Francisco Fed President Williams is out on the wires now, via MNI, making a scheduled speech on the monetary policy program.

Key Points:

US economy has reached a turning point from recovery to expansion

Neutral interest rate somewhat below 3% 

Gradual rate hikes to sustain econ expansion 

Likely to start normalizing balance sheet this yr 

Have 'exceeded' full employment by 'fair amount' 

Risk of overheating econ with very strong labor mkt transitory factors pulling down inflation 'waning' 

Expect US unemployment rate to edge down and remain a little above 4pct through next year

Expect US inflation rate to hit fed 2pct goal sometime next year

US economy about as close to dual employment-price mandates as we've ever been

Fed balance sheet management will be widely telegraphed, gradual and boring

Fed will let b/sheet gradually shrink until holding no more securities than necessary, haven't settled on exact number