WHy does rising the interest rates work to counter inflation?

Question

WHy does rising the interest rates work to counter inflation?

Answer 1

Because as the interest rates rise there isn't as much investment, so aggregate demand shifts left, lowering the price as well as GDP.

Answer 2

It's raising.

It curtails the demand.

Answer 3

Rising interest rates counter inflation through two channels.

First, the process of raising interest rates, open market operations, literally takes money out of the system.  If inflation is the result of money supply growing faster than economic activity, then reducing the money supply will slow inflation.

Secondly, higher interest rates can slow economic growth, which will counter agents expectations of future price increases.  This will in turn lead to less inflation.  Higher interest rates slow growth by shrinking investment demand.