Increasing interest rates leads to false assumptions

  Increasing interest rates would lead to a slow down in inflation. But this is because it starves the economy from capital leading to consumers and investors with less money available to spend. Prices then fall creating the illusion that things have improved from lower prices. But it fails to recognize that the reason prices have fallen is because people are now poorer than before thus they are unable to purchase the same quantity of goods as before.

  Currently, demand stands at D1. If we were to assume raising interest rates do succeed in reducing demand and thus reducing prices. It is only because consumers are now worst off. D1 then falls to D2 thus reducing the price of goods from P1 to P2. But it also reduces the quantity of goods from Q2 to Q1.

  How consumers are supposed to be better off from a manipulated shortage of goods I do not know.