Gradual, says Federal Reserve Chair Janet Yellen, is the best word to describe the pace of likely interest-rate increases. But not too gradual.

The U.S. central bank, which has raised short-term rates only four times since cutting them to nearly zero during the financial crisis, is considering another 25 basis-point bump at the end of this year. That would take the benchmark federal funds rate to a range of 1.25% to 1.5%, and might be followed by three more next year.

But nothing is a given, Yellen emphasized in a speech on Tuesday, Sept. 26, at the annual meeting of the National Association for Business Economics in Cleveland, Ohio.

"The economy is capable of generating many surprises, and we will calibrate monetary policy as I've tried to emphasize, to unfolding developments and our reassessment of them," Yellen explained in a question-and-answer session after her speech. "Even if not perfectly predictable, the path is likely to be gradual."

Among the challenges facing the Fed is balancing the pace of rate hikes with both inflation that continues to lag a 2% target, steady gains in the labor market and the unwinding of the central bank's own $4.5 trillion balance sheet.

"Moving too quickly risks overadjusting policy to head off projected developments that may not come to pass," Yellen explained, an important point with inflation not only lagging the Fed's target but tightening 20 basis points to 1.4% since March, according to one measure. "But we should also be wary of moving too gradually."

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With average 2017 growth of 176,000 jobs a month, ahead of the 100,000 needed to keep up with new workers, insufficient hikes could cause the labor market to "become overheated, potentially creating an inflationary problem down the road that might be difficult overcome without triggering a recession, Yellen said.

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The Fed's decisions on rates are particularly important to banks from JPMorgan Chase & Co. (JPM) - Get Report to Citigroup Inc. (C) - Get Report and Bank of America Corp. (BAC) - Get Report , which typically boost their margins by passing increases on to borrowers more quickly than depositors.

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Their interest revenue has climbed since the Fed first moved rates off the so-called zero bound in late 2015, a welcome change from seven years of crimped returns.

Adjustments to interest rates remain the Fed's preferred tool for calibrating growth, Yellen reiterated last week, and the trimming of its balance sheet -- which grew more than four-fold with securities purchases designed to buoy the economy after the 2008 crisis -- will likely continue unabated once it starts next month, barring a significant downturn. 

The rolloff will be capped at $10 billion a month initially, and the limit will be raised by the same amount every three months until it reaches $50 billion, the central bank said. Private economists have predicted the Fed will ultimately pare only about $1 trillion of its holdings.

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Editors' pick: Originally published Sept. 26.