For example, if a continued run-up in commodity prices appeared to be sparking a wage-price spiral, then underlying inflation could begin trending upward at an unacceptable pace. Such circumstances would clearly call for policy firming to ensure that longer-term inflation expectations remain firmly anchored.
This implies that lowering inflation is the easiest way to lower interest rates. Consider another example. The South African government borrows in both local and foreign currency. When it borrows for 10 years in rand, it pays an interest rate of close to 9%.