Janet Yellen has a message to markets: the Federal Reserve will keep interest rates low for a while yet and, when it does begin to tighten monetary policy, it will do so only slowly.
For now, the public has zeroed in on when the U.S. central bank might finally raise rates after more than five years near zero. But that tells only half the story: just as important for American families and businesses is how quickly the Fed will hike borrowing costs, and how high.
The Fed has telegraphed that the first rate rise is likely to come around the middle of next year, as long as the U.S. economy keeps healing, and policymakers are increasingly describing how the first tightening cycle in more than a decade will play out. It is an issue that Yellen, who took over as chair of the central bank last month, will almost certainly have to address after a policy meeting next week.
The plan for now is for a series of modest rate increases that do not risk sending the economy into relapse, according to Fed policymakers who have discussed it in recent weeks.
While an unexpected jump in inflation or a dangerous asset bubble could force its hand, the central bank is likely to deliver a dovish message of patience when it comes to removing its extraordinary monetary stimulus.
"What I'm anticipating is that the gradual rise in rates would acknowledge that there are still conditions out there that are sub-optimal," Dennis Lockhart, president of the Atlanta Fed, said in an interview last week.
"I can in no way predict exactly the conditions at that time," he added. But "I don't expect when we get to that point that we're likely to have to move the policy rate up in large chunks to get it high fast."
As with its easing cycle, the Fed will be in uncharted territory when the time comes to tighten. No major central bank has had to raise rates after keeping them at effectively zero for as long as the Fed has in the wake of the 2007-2009 financial crisis and recession.
By stressing a go-slow approach to tightening, the Fed can squeeze a little more stimulus out of its low-rate policy. If financial markets moved to price in a more abrupt tightening cycle, yields on long-term debt would rise, lifting borrowing costs.
"To me you really want to stretch out your expectations about the whole