Interest rates in the US are skyrocketing not because people are demaning more money but because people are demanding far less debt than is being produced ...
Essentially, the Federal Reserve takes the Treasury's debt, generates an IOU with a certain value and a date where they're going pay this out and sells it for a price lower than it value at maturity and this determines the interest rate that they talk about in their rate setting meetings. For example, selling a $100 treasury with a collection date 1 year in the future for $97.5 you end up with an interest rate that is (slightly more than) 2.5%.
Now, how this influences other interest rates is because this treasury debt is 100% safe and you will get that dollar value from the government at maturity so all other debt needs to have a premium in order to attract investors because of the risk they represent. For the past couple of weeks, there has been low demand for treasury bonds which has resulted in the government reducing the price they sell their bonds at and (therefore) increasing the interest rate of all debt.
The outcome from this will (likely) be that the treasury and federal reserve will push for more quantatitive easing (printing money) resulting in a devaluing of the dollar; and China could follow through on its threats and stop/slow down the purchase of US debt and/or (re)moving the peg with the US dollar, which would result in higher interest rates and higher inflation.
