How are interest rates used by the Monetary Policy Committee to control inflation?

Inflation is the continuous increase in prices over time which can erode the value of money over time if left unchecked. This is the reason why the central bank has an interest in controlling inflation and keeping at a target of 2%. Inflation usually follows the same trend as aggregate demand (AD), when AD rises, we can also see and rise inflation with the same effect occurring when AD falls. Therefore to control inflation, monetary policy is used by controlling interests rates to change the AD which in turn effects inflation. AD is composed of consumption, investment, government spending and exports minus imports. Therefore, the most immediate effect of a monetary policy change will usually effect the first 3 components of AD. For example, if inflation was rising quickly, the monetary policy commits could decide to raise the interest rate in order to make more expensive for consumers to borrow money. The rise in the 'price' of money may mean that consumers cut back on consumption therefore shifting the Ad curve to the left. This will bring inflation back down to its equilibrium level. Other examples could be that the increase in interest rates decrease both investment and government spending because it becomes more expensive which would also shift the AD curve to the left and allow inflation to decrease.This is how the monetary policy committee would use contractionary monetary policy to reduce inflation. The same can also be done when the aim is a rise in inflation .