As Fed raises rates, aim is not to roil markets, Williams says

(Reuters) - The U.S. economy is at or near the Federal Reserve's goals of full employment and stable prices, San Francisco Fed President John Williams said, adding that the U.S. central bank wants to make sure markets stay calm as it slowly returns interest-rate policy to normal.

"If you remember nothing else I’ve shared with you today, I hope you’ll remember this: The last thing we want to do is to fuel unnecessary or avoidable volatility or disruption – whether we’re talking about domestic markets or international markets," Williams said in remarks prepared for delivery Monday to the Symposium on Asian Banking and Finance, co-hosted with the Monetary Authority of Singapore.

With the economy at full employment and inflation expected to reach the Fed's 2-percent goal by next year, the Fed needs to keep raising U.S. interest rates gradually or risk overheating the economy, Williams said.

The Fed raised rates in March, and at the time telegraphed a plan to lift them two more times this year, a pace that Williams last week told Reuters he thinks makes sense.

Policymakers meet again next month to decide their next move.

The Fed, Williams said Monday, is also committed to trimming its $4.5 trillion balance sheet, accumulated during years of bond-buying to stimulate investment and hiring after the Great Recession.

The process, which he said will likely start sometime later this year, will be "widely telegraphed, gradual, and – frankly – boring," Williams said. "The more public understanding there is, the lesser the risk of market disruption and volatility."

The last time the Fed shifted its policy on its balance sheet, domestic and international markets swooned in response. Fed officials this time around are keen to prevent another such incident.

(Writing by Ann Saphir; Editing by David Gregorio)