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Fed's Williams says mid-year rate rise may be appropriate

John Williams, president and chief executive of the Federal Reserve Bank of San Francisco, takes part in a panel discussion titled "U.S. Overview: Is the Recovery Sustainable" at the Milken Institute Global Conference in Beverly Hills, California May 1, 2012. REUTERS/Danny Moloshok

SYDNEY (Reuters) - Federal Reserve policymakers should wait no more than a few months before considering raising U.S. interest rates from their current near-zero level, a top Fed official said on Tuesday.

"I think that by mid-year it will be the time to have a serious discussion about starting to raise rates," San Francisco Fed chief John Williams said in remarks prepared for delivery to Australian Business Economists.

Rather than risk overshooting on inflation, forcing the Fed to respond with potentially dramatic rate hikes, "I see a safer course in a gradual increase, and that calls for starting a bit earlier," he said.

Williams, a voter on Fed policy this year, made nearly identical remarks on March 5.

Fed officials last week removed a vow to be "patient" on raising rates, but downgraded their assessment of the economy and signaled they expect to raise rates more gradually than they had thought in December.

(Reporting by Wayne Cole; Writing by Ann Saphir; Editing by Lisa Shumaker)