Question

How does inflation factor into the Federal Reserve raising or lower interest rates?

Answer 1

When interest rates are low, more people are able to
borrow more. When people borrow more they also
spend more that leads to inflation.
On the other hand, when interest rates are high, people
borrow less. When people borrow less, they also spend less.
When people spend less the inflation comes in control and
the price level decreases.
The federal reserve (Fed) controls the federal funds rate through
open market operations. When the Fed wants to control inflation,
the Fed increases the federal funds rate through open market operations.
When the Fed increases the federal funds rate the interest rates rise.
When the Fed wants to boost economic growth, the Fed lowers
the federal funds rate through open market operations.
When the Fed lowers the federal funds rate the interest rates
decrease.