The job of the federal reserve is "to take away the punch bowl just as the party gets started".

If you have too low rates, that causes an increase in lending/borrowing, which increases the money supply. That devalues the currency, leading to inflation where too many dollars are chasing a fixed set of goods (stocks or houses or whatever) or services (people causing wage inflation). If you see the economy "overheating" because of all that cash, raising rates slows it down, hopefully letting it get back into balance rather than crashing. A "soft landing" is what you want.

Here's an example: The crash in 2008 was caused by too much money in housing, for example. Loose lending put too much money into the market and that caused inflation in real estate that wasn't sustainable and didn't make business sense if you didn't have the basically free funding. When it all fell apart, it really fell apart.