system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: How does increasing interest rates tame inflation?

How does increasing interest rates tame inflation? I was also intrigued by hearing this: The federal reserve is trying to decrease demand without tipping over the economy.
gpt
The Federal Reserve controls the Federal-Funds-Rate. That is the interest rate at which banks lend to each other. A bank that wishes to lend but doesn't have the funds to do so must borrow at the Fed-Funds-Rate.

There are two mechanisms by which this can reduce inflation. Some economists emphasise one and some emphasise the other.

The costs of higher interest rates in the Fed-Funds-Rate market are passed on to borrowers. That increases interest rates charged on loans for normal people and for businesses. That means that borrowers pay more interest and lenders receive more interest. Often businesses expand by borrowing to fund new capital investment the increase in interest rates reduces this. This in turn reduces aggregate demand by reducing the demand for new capital goods. This is the interest-rate side of things.

Commercial banks create money when they create loans (and to lesser-extent at other times).  If more loans are made when interest rates are lower, then more money will also be created. As a result, raising interest rates reduces the rate-of-increase of the supply of money, and may cause the money supply to fall. The tools that Central Banks like the Fed use can directly affect the supply of money. Open-Market-Operations and Quantitative Easing can directly affect money supply because they involve buying (or selling) bonds for money balances. Though only some of the Central Bank's tools affect the money supply directly.

There is debate over which of these two effects is the largest. Some economists believe that the first is nearly irrelevant, some believe that the second is nearly irrelevant. But it is clear overall that raising interest rates decreases inflation.