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Central banks do raise interest rates in order to curb inflation. By increasing the rate of borrowing, the bank reduces the rate of consumption and company surpluses. This is because as the cost of borrowing increases , the supply of money gradually reduces in the system.
Increasing interest rates will also tend to increase the exchange rate in a country as it will tend to increase the flow of money into the capital account of investors.
Eric22 answered the question on November 14, 2018 at 17:48
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