What's going on?

The U.S. economy is doing pretty well � it grew 2.3% in the second quarter. The good performance paves way for the U.S. Federal Reserve (the Fed) to raise interest rates later this year.

What does this mean?

It�s not stellar growth, but it�s decent and it appears to be sustainable. This means that the Fed will probably feel confident enough in the economy to increase interest rates for the first time since 2007. Increasing interest rates act as a headwind for the economy because it makes borrowing money more expensive � money that could be used to buy machinery and hire workers.

Why should I care?

1. Rising interest rates are a positive for the U.S. dollar; it has already had a very strong month as investors anticipate an interest rate rise as early as September.
2. Rising rates are also a moderate negative for stocks, but the positive impact of the growing economy will probably have a stronger influence on U.S. stock prices.
3. Bonds tend to sell off when interest rates go up.