What's going on?

The vice-chairman of the US Federal Reserve has made comments in the past few days suggesting that the Fed might decide to raise interest rates in September.

What does this mean?

The Fed is due to meet on September 16 and 17^th, at which point it might choose to raise interest rates for the first time since 2007. By raising rates, the Fed would be creating somewhat of a headwind to the economy, but the idea is that when another recession hits, the Fed will be able to stimulate economic growth by then lowering interest rates. They can, of course, only do this if they raise rates when the economy is doing (relatively) well!

Why should I care?

1. Because higher interest rates make it more difficult for the economy to grow, rising rates is usually somewhat negative for the stock market. However, this can be offset by a growing economy � which it is now doing at a steady rate.
2. Rising rates is usually bad for bonds prices � and because rates have been so low for so long, bond prices are really quite vulnerable to a rising rate cycle.