The key to this question (and all others!!) is understanding the meaning of the sentence. What is it that this sentence wants to communicate.

In hoping to restrain economic growth, interest rates were raised by British policymakers, making it more expensive to borrow for businesses and consumers.

British policymakers wanted to restrain economic growth. So they raised the interest rates. This made borrowing for businesses and consumers more expensive. (Note that this is what the inferred meaning of the sentence is.

Clearly the sentence has modifier errors - The placement of modifier "in hoping to ..." appears to modify "interest rates" when it should modify "British policymakers". This error can be corrected by changing the voice of this sentence to active voice. Also, "to borrow for businesses and consumers" is not clear. It should state "for businesses and consumers to borrow".

Now lets come to choices D and E. The key take away from the meaning analysis to discern between choices D and E is the fact that British policymakers were hoping to restrain economic growth. This was the intended purpose of their action of raising the interest rates.

Now lets read choice D -
Hopefully restraining economic growth, British policymakers raised interest rates, making more expensive borrowing by businesses and consumers.

This choice states that British policymakers raised interest rates. This led to more expensive borrowing...But the wording of the modifier "hopefully restraining economic growth", the choice implies that by hopefully restraining economic growth, British policymakers raised interest rates. This is clearly not the intended meaning. The restrain in economic growth is supposed to be the result of the action of raising interest rates.

(Note that there are other errors as well in Choice D - more expensive borrowing by businesses is awkward construction)

Thus, you need to understand the intended meaning of the sentence and use the correct construction of the sentence to communicate that meaning.

Choice E on the other hand, uses this modifier - hoping to restrain...- to indicate the purpose of the action of British policymakers.

CaptainM wrote:Please explain what is wrong with D?
How to decide between "Hopefully restraining: and "Hoping to restrain"?

the word "hopefully" has 2 main uses:
(1) to describe an action done by someone in a hopeful mood -- The man looked hopefully upward and scanned the skies for a rescue plane.
(2) to express the idea that the narrator or writer of the sentence hopes that something will happen -- The city has allocated extra money to the school budget; hopefully, this infusion will allow all of the high school's sports to continue.

in this sentence, neither of these meanings works.
it's not #1; that interpretation would imply that the policymakers themselves were actually restraining economic growth while feeling hopeful about something. that's not the intended meaning -- the intended meaning is that the policymakers were hopeful that they could restrain economic growth, not that they were actually restraining it.
it's also obviously not #2, as the narrator of the sentence is not trying to express an opinion. (that will never happen in a gmat sc problem.)