That's deflationary, not inflationary. Higher interest rates and a higher cost to borrow discourages borrowing and discourage spending.
Deflation.
I thought after I posted that, that my thinking would seems backwards.
What I'm conteding is that higher interest rates are (likely) a bellwether of inflation or coming inflation. Think the Carter years. Interest rates went through the roof yet prices were sky-high.
I went to Toy-R-us today and it cost me $40 for a puzzle, a DVD and 2 boxes of crayons - all made in China.
Ask yourself, despite high unemployment, crummy retail sales, low money velocity and failing businesses, in your neck of the woods, are you paying more for everything or less?
See what I mean?