Does decreasing the interest rate cause a decrease in inflation?

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In general, decreasing the interest rates charged by a central bank leads not to less inflation but to more.  A central bank tends to decrease interest rates when it needs to stimulate the economy and it tends to increase interest rates when it is trying to decrease inflation.

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In general, decreasing the interest rates charged by a central bank leads not to less inflation but to more.  A central bank tends to decrease interest rates when it needs to stimulate the economy and it tends to increase interest rates when it is trying to decrease inflation.

When a central bank lowers interest rates, it becomes easier for people and businesses to borrow money from banks.  This increases the money supply and it increases the amount of economic activity that is going on in the economy.  When these things happen, the price level will (all other things being equal) go up.

So, decreasing interest rates does not tend to decrease inflation.  An increase in interest rates is usually used to try to control inflation.

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