A common interpretation is "Higher interest rates put less borrowing power in the hands of consumers abd businesses. And when they spend less, firms are not selling everything and prices naturally falls." In the perspective of AS-AD model, this is caused by a downward shift of the demand curve. However, I suppose it will cause a supply curve shift as well. Today, most of the production are funded by short-term borrowing and relied on people paying them for the goods and then pay back the loans. So when the interest rate goes up, the production costs go up, and hence causing a negative supply shock as well. But reality seems to confirm the fact that higher interest rate lower inflation. Why is that? Is that becuase the supply shock is not as siginificant as the demand shock? If so, why is that?