Fed’s Williams: Rates will need to continue to gradually rise to ‘new normal’ of 2.5%

"Based on my outlook for employment and inflation, I view a gradual pace of increases over the next two years, bringing the federal funds rate to its new normal of 2.5 percent, to be appropriate," San Francisco Fed President John Williams said in his prepared remarks, as per Reuters reports.

Key quotes (via Reuters):

• Appropriate to raise U.S. interest rates gradually
• Should take about four years to shrink balance sheet to new normal level
• Unwinding balance sheet should tend to push up long-term rates gradually