By Ann Saphir
Williams, 48, will take up the post of president and chief executive effective Tuesday, the San Francisco Fed said in a statement.
Williams will join other regional Fed presidents and the Fed Board of Governors in Washington in shaping U.S. monetary policy, although he will not have a vote this year on the Fed's Open Market Committee under the usual rotation of Fed bank presidents. The Fed's next policy meeting is on March 15.
His appointment adds to the dovish composition of the U.S. central bank's policy-setting committee, which is also set to lose two vocal inflation hawks in coming months. Still, analysts said he may not be as dovish as his predecessor.
"I see him very much as a centrist, leaning somewhat in the dovish direction," Michael Hanson, an economist at Bank of America. "That's to be expected given how hard that area has been hit in the recession. I don't think he's quite as dovish as many people would characterize Yellen."
The Fed is at a critical point in its history, having cut interest rates to near zero to help pull the U.S. economy from its worst recession in decades and committing to buy more than $2 trillion in long-term government and mortgage bonds to shore up the recovery.
With recent data suggesting the U.S. economy is strengthening, some of the Fed's more hawkish officials have suggested it might be time to end the bond-buying program.
Fed Chairman Ben Bernanke on Tuesday signaled he disagrees, saying that while there is evidence the economic recovery is gaining momentum, job growth is too anemic.
Yellen, now the board's vice chairwoman, is known as an inflation dove more worried about the threat of unemployment than that of high inflation. Williams' recent research suggests he is cast in a similar mold.
"The economy still has enormous slack," Williams said in a speech on February 4. "Millions of people could be put back to work and many more goods and services could be produced without igniting unwelcome inflation."
Williams has credited the Fed's quantitative easing with restoring about 3 million jobs to the U.S. economy, with about 700,000 of those jobs stemming from the most recent round of bond-buying.
The appointment of a president with a dovish outlook comes as the Fed faces the exit of at least two hawks from its policy-setting committee.
The board has one vacancy already, and at the end of March Kevin Warsh, a hawk skeptical of recent monetary easing, steps down. Kansas City Fed President Thomas Hoenig, who used all of his votes on the Fed's policy-setting committee last year to dissent on Fed easing, faces mandatory retirement on October 1.
(Reporting by Ann Saphir and Mark Felsenthal; Editing by Kenneth Barry)