U.S. central banker John Williams said on Friday he does not expect any market turbulence as the Fed gets underway with reducing the huge balance sheet built during its campaign to stimulate the U.S. economy.

"I don't anticipate any sudden or large effects on rates or spreads or things like that as we normalize," Williams, president of the San Francisco Federal Reserve, told reporters in Zurich.

"Obviously we've talked about this endlessly. We've announced it and the markets have taken totally taken this in stride. But it's still an open question as we actually implement this next month and over the next several years - 'how will markets react?' Well obviously be following that very carefully."

Normalization was the key theme at the Fed, said Williams.

The Fed said on Wednesday it would begin the years-long process of trimming its $4.5 trillion in assets, most of them amassed to encourage investment and growth in the wake of the 2007-09 financial crisis and recession.

It also signaled it will likely raise rates again later this year and three more times next year, despite low inflation that has surprised policymakers and has traders convinced the Fed will need to slow its pace of rate hikes.

Williams said the Fed could indeed increase rates again this year and three more times next year, but the exact timing was not important, with a gradual increase in interest rates now under way.

Provided the U.S. economy continues to progress and inflation was on track to reach the Fed's 2 percent goal, "I would ascribe to a gradual pace of rate increases, which assuming all that's happening, could have another rate increase this year and three next year," Williams said.

"But honestly the exact timing of that is not that important. I think the overall view that we would be raising rates gradually over the next two years and getting back to a normal level is the one I think I have a lot more confidence in."

Eventually, the Fed would reach a "new normal" of a Fed Funds rate of 2.5 percent, Williams said.

"My view, based on a lot of research people have done including my own work on this, is that the normal Federal funds rate is likely to be around 2.5 percent," Williams said.

"Obviously, the pace at which that happens and exactly the contour of that will depend on how the economy progresses but that's my baseline case at this point."

Interest rates rather than bond buying would become the primary tool of Fed monetary policy in future, Williams said, with the bank also having room to cut them if the U.S. economy hit difficulties.

It was also imperative for the vacancies on the Fed to be filled "sooner rather than later," Williams said.

There will soon be four places to fill on the Fed when Vice Chairman Stanley Fischer retires in October. U.S. President Donald Trump has also not yet said if he will nominate Federal Reserve Chair Janet Yellen for a second term, with her current term due to end next February.

"It is an important issue to have the vacancies filled... When you only have half the board that is stretching them very thinly in terms of their responsibilities," said Williams.

"My only plea would be they fill these positions sooner rather than later."