I’m not exactly current on this stuff, but I thought that most central banks now change their lending rates as a technical exercise based on inflation forecasts, and policy changes (such as central bank lending rate changes) are intended to target inflation rates directly. I think that it’s mostly news media commentators that attribute central bank interest rate changes to attempts to affect the exchange rate, strengthen the economy or whatever.
Central bank lending rate changes tend to be technical exercises designed to achieve a particular goal in a measure such as inflation through administered changes in the bank rate. The big economic stuff like growth, wealth and economic strength are subsumed in the relationship between a simple measure like inflation rate and the web of relationships in abstract theory.
In the world of macro-economics everything is related to everything, so it may be fair to say that raising interest rates will raise the dollar, and it also may be fair to say that it will weaken it. Economists have two mouths with at least four sides. It’s the theory that makes for double-speak. What is fair to say depends on context, which in macro-economics is almost impossible to specify adequately.
An adequate specification would have to include time frame, because nearly any forecast of anything is true in absence of a time frame. However, in the short term, raising rates is more likely to raise the dollar since it attracts investment and invites speculation, and investment money can move very quickly. Lowering the dollar by wrecking the economy generally takes a while, and who know what might happen while we’re waiting on the wreckers.
Making statements like ‘interest rates will be raised to strengthen the economy’ is sort of like reasoning from a hypothetical and always having to affirm the antecedent, and never being able to include all relevant postulates. A hypothetical where the antecedent is affirmed can be a true statement even when the antecedent is false (if interest rates are raised, then….). But in a macro-economic system, interest rates can’t just be raised, because everything is related to everything and dependent on each other. Interest rates are market determined. It is not true that interest rates are raised. Central banks raise their lending rates, not interest rates in general.
Even if the ability of a central bank to engineer interest rates through its market influence is granted, there still is the problem of missing postulates such as the time frame between central bank lending rate changes and effect (some economists say 2 1/2 years average and others say there’s really no reliable relationship). There’s also a bunch of missing postulates such as the inflation rates among trading partners and structural relationships within a domestic economy. However, there is one missing postulate that really is impossible to specify. What might happen in the several years or so while we’re waiting for the administered bank rate changes to work that might be relevant to the change? The future can’t be forecast reliably and engineers can’t engineer for factors that cannot be known. Wars, hurricanes, oil embargos, speculative attacks epidemics etc. happen, and happen quickly and without much warning. A successful forecaster never says what will happen and when it will happen in the same sentence.