As already mentioned it's a complex subject that I personally was "forced" to go through in an econ 201 level course back in university. It involves understand

As already mentioned it's a complex subject that I personally was "forced" to go through in an econ 201 level course back in university. It involves understanding the money supply levels( https://www.investopedia.com/terms/m/moneysupply.asp https://www.investopedia.com/terms/m/moneysupply.asp ), fractional reserve banking ( https://www.learningmarkets.com/understanding-the-fractional-reserve-banking-system/ https://www.learningmarkets.com/understanding-the-fractional... ), and how the velocity of money (eg how often money changes hands in spending/loans) affects prices. (I'm going to simplify some things here to keep this high level). In modern banking, a central bank creates money. Let's say it's $1000. That's monetary growth in the base monetary supply (usually known as M0 or M1 in economic cirlces depending on the country). That $1000 gets deposited into a bank at a set core interest rate. The bank then keeps a fraction as a reserve and lends the rest out, lets say half of it. Now you get $1000 in the original bank and $500 in another bank. So now we have $1500 total. the 2nd bank takes the $500, keeps a reserve, and loans out more and so on until eventually a "stable" supply of money exists. Sustained hyperinflation happens when the central bank just pumps out the base cash. Since there'd be so much money sloshing around, prices across the board rise. If the growth of the base of money is relatively stable (and how much it should increase is a long topic with tons of minutia), interest rates affect the growth of the later levels of money (known as M2/M3). Lower interest rates mean more borrowing and therefor more spending. But if it's too low for too long, prices will rise and you'll drown out productive growth. This happened in the "stagflation" of the 1970s where you had high inflation coupled with low economic growth. If interest rates are too high, you risk making it difficult for productive use of money to be used. So that's the dilemma of central banks. The temping thing is that keeping interest rates low can look good in the short term, as inflation tends to take awhile to work its way through the economy. Milton Friedman loved to say that artificially low rates are let getting drunk. The party is now, but there's a hangover you have to deal with later. The hard part is that inflation isn't necessarily something people want. You want it if you have too much debt or assets that are inflation "protected" (gold, housing), but if you're on a fixed income, you get screwed. The hard part is that while we've had low inflation over the past few decades, we've had several asset bubbles that have driving up housing, commodities, etc all over the place. If you're explaining it to somebody else in laymans terms, it helps to explain that money is subject to the same supply and demand curves as anything else (even when it was backed by gold, new gold discoveries in the late 1800s drove inflation). Too much money makes it less valuable and vise versa. Higher interest rates make the money "rarer" and thus increase it's worth to everything else.