Higher interest rates mean people have to pay more for their mortgages, for example, which means they have less money to spend on other things.
Fewer people wanting to buy things should, in theory, mean that prices rise less quickly.
It also makes it harder for firms to borrow money and expand.
Alternatively, if the Bank cuts interest rates, borrowing becomes cheaper, and people have more money to spend on other things.
This can encourage businesses and people to borrow and spend more, boosting the economy.
The Bank of England governor Andrew Bailey said he had seen “strong evidence” that the process to reduce inflation “is working its way through”.
But he emphasised that the Bank had to be sure that having reached its 2% target, it would stay there.
The minutes of the Bank’s June meeting suggest the first cut could come at its next meeting on 1 August.