June 22 (Reuters) - The U.S. central bank may be in a position to start reducing its extraordinary support of the U.S. economy by late this year or early next year, according to San Francisco Federal Reserve President Mary Daly. “I am bullish on the recovery,” Daly told reporters on Tuesday after a talk on climate change risks at the Peterson Institute. “Substantial further progress” towards full employment and the Fed’s 2% inflation goal - the threshold the Fed set last December for reducing its $120 billion in monthly asset purchases - is “within our line of sight - I think it’s possible we could even get there some time late this year, early next year.” “We are not there yet, but it is appropriate to start preparing for the time we would hit that threshold,” she said. Talking about any change in interest rates, she said, is by contrast not even on the table, and the Fed needs to remain “steady” on policy and not respond to the next few months of “volatile” data on the labor market and inflation. Reporting by Ann Saphir; Editing by Andrea Ricci Our Standards: The Thomson Reuters Trust Principles.