The fed respond to inflation *AND* unemployment rate, and they respond to their own forecasts of those things. The fed didn't stimulate inflation by choice. Th

The fed respond to inflation *AND* unemployment rate, and they respond to their own forecasts of those things. The fed didn't stimulate inflation by choice. The rates were at 0 for most of the decade and inflation was very low. Increasing interest rates was a response to inflation -- partially created by QE and stimulus spending, supply chain disruptions, and other supply/demand shifts. As for how interest rates work: they make borrowing more expensive. There's a bunch of second-order effects from that but borrowing cost and time value of money are the main thing to keep in mind.