Central banks use interest rates as a primary tool to control inflation by influencing borrowing and spending behaviors. When inflation is high, central banks, such as the Federal Reserve in the United States, may increase interest rates. Higher interest rates make borrowing more expensive and saving more attractive. This leads to reduced consumer spending and business investments, which can decrease the overall demand in the economy. Lower demand tends to bring down prices, thereby controlling inflation.

Conversely, if inflation is too low or the economy is in a recession, central banks might lower interest rates. This reduces the cost of borrowing and decreases the incentive to save, which can boost consumer spending and business investments. Increased demand can help raise prices to a healthier level, stimulating economic growth.

However, there are risks associated with using interest rates as a tool to control inflation. Raising interest rates too quickly or too much can slow economic growth excessively, potentially leading to a recession and higher unemployment. On the other hand, lowering interest rates too much or keeping them low for too long can lead to excessive borrowing and risk-taking, potentially creating asset bubbles and financial instability. Moreover, very low interest rates may not stimulate spending as expected if consumer and business confidence is low.

In conclusion, while manipulating interest rates is a powerful tool for controlling inflation, it must be used carefully to balance between fostering economic growth and maintaining price stability.