Interest rates have a significant impact on inflation. When interest rates rise, borrowing money becomes more costly, reducing spending and economic activity. This decrease in demand leads to a decrease in prices, lowering the inflation rate. On the other hand, when interest rates are low, borrowing becomes cheaper, stimulating spending and economic growth. This increased demand leads to rising prices and higher inflation. Central banks often adjust interest rates to manage inflation. By raising rates, they aim to slow down the economy and curb inflationary pressures. Conversely, lowering rates stimulates borrowing and spending to boost economic activity during times of low inflation.