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Policy Orchestration

Although an increase in interest rates is unavoidable, many people think the policy is too early because so far inflation is still under control. There is no urgency to raise interest rates.

A PRASETYANTOKO is rector of Atma Jaya Catholic University
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The debate about raising interest rates in response to high inflation has taken place almost everywhere and has involved many people, including top economists. Jason Furman of Harvard University represents the group pushing for an increase in interest rates of the United States central bank (The Fed) to fight inflation. Meanwhile, James K Galbraith of the University of Texas, Austin, is on the opposite side, who warns of the risk of rising interest rates on unemployment.

Galbraith has, cynically, quipped that his Harvard colleague would benefit financially from his investments and financial assets if interest rates were raised. The increase in interest rates also involves policy polarization that is oriented towards elite and non-elite groups.