Raising interest rates makes borrowing more expensive and saving more attractive. Over time, that cools spending, which in turn eases the pressure on prices.
The bigger picture
The catch is timing. Economists often say monetary policy works with “long and variable lags”: a change made today may not be fully felt for a year or more.
That is why central bankers try to look ahead rather than react to the latest figure, and why their decisions can seem out of step with what people feel right now.
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