The Fisher effect says that highter inflation rate leads to a higher nominal rate.
I found an interesting explanation about the interest rates:
Lower interest rates translate to more money available for borrowing, making consumers spend more. The more consumers spend, the more the economy grows, resulting in a surge in demand for commodities, while there’s no change in supply. An increase in demand which can’t be met by supply results in inflation. Higher interest rates make people cautious and encourage them to save more and borrow less. As a result, the amount of money circulating in the market reduces. Less money, of course, would mean that consumers find it more difficult to buy goods and services. The demand is less than the supply, the hike in prices stabilise, and sometimes, prices even come down. So when we have inflation, this could mean that the money supply has increased. So when the money supply has increased and we have an inflation, according to the fisher effect there has to be a higher nominal rate. In the above explanation, they say that lower interest rates translato to more money available.
I can't understand now, does it lead to higher or lower interest rate?