How do rising interest rates typically affect inflation in an economy?

Rising interest rates typically lead to lower inflation in an economy. When interest rates go up, borrowing money becomes more expensive, which means people and businesses are less likely to take out loans. This decrease in borrowing can slow down spending and investment, reducing the overall demand for goods and services. For example, if a family decides not to buy a new car because of higher loan costs, car sales may drop, leading manufacturers to lower prices. As demand decreases, inflation tends to stabilize or decline because prices are not rising as quickly.