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Assume the central bank is concerned with a possible higher inflation in the future therefore it...

Assume the central bank is concerned with a possible higher inflation in the future therefore it decided to increase the interest rate. How does the central bank increase the interest rate in the short run?
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Central bank is concerned of higher inflation rate in future therefore they it decided to increase the interest rate. Central Bank can increase interest rate in short run by open market operations through which they sell government bonds and securities into the market and accept money in exchange of it. This process will absorb extra cash holdings of people in economy and reduce money supply. Reduction in money supply raise rate of interest because people are willing to pay higher rate while borrowing if there is limited money in economy.

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