How can we have effective policy in the absence of reason?

"No, Fed didn't make a mistake by Hiking Rates," wrote Mohamed A El-Erian. The Federal Reserve increased its Funds rate by 25 basis points last month despite core consumer price inflation at 1.7%, which is below the target rate of 2%. The Fed also signaled its intention of another rate rise later this year and for gradually reducing its balance sheet, by selling off $10 billion worth of bonds per month it had acquired during quantitative easing. The Bank of International Settlements supports a normalization of monetary policy by central banks. El-Erian raised 4 areas of concern. Although unemployment is down to 4.3%, which maybe considered 'full employment', labor participation rate has fallen by 0.2% to 62.7%, "an historically low level". If unemployment falls too low wages rise fast and inflation follows. Inflation is expected to rise but no one can say when. US economists are still debating the causes of the Great Depression of 1929 and some fear instability in financial markets which have become used to ultra-low interest rates. Lastly, there is the fear of "what if" the Fed is making a mistake, which will stop the recovery and create a financial meltdown. The danger is that loose monetary policy may create asset price bubbles which will ultimately burst, causing even greater chaos. "Put me in the camp of those who, when assessing the balance among the four cited factors, feel that the Fed's June interest rate hike was not a policy mistake, that another hike in the remainder of 2017 is warranted based on current indicators, and that policymakers should take seriously the growing risk of future financial instability, especially in the absence of a careful normalization," wrote El-Erian. This is refreshing because in India everyone wants interest rates to be reduced, the only debate being about by how much. The Chief Economic Adviser, A Subramanian expressed his disappointment at the Reserve Bank keeping interest rate steady at 6.25% last month. On the one hand the government boasts that India has the fastest growing economy in the world and on the other the CEA complains about a fall in real Gross Value Added. So, crow about GDP and whine about GVA, sounds as if they want it both ways. The RBI cannot make its policy decision from Indian figures alone, it has to keep an eye on what the Fed is doing. One reason why prices are increasing slowly is because the rupee is strong, which lowers cost of imports, especially oil. Low oil price reduces cost of transport, which has a knock-on effect on prices of most goods. The rupee is strong partly because foreign investors are buying government bonds to take advantage of higher interest rate compared to the US. Government policy should be based on careful reasoning and not parroting what politicians say. Perhaps, no one wants to lose his cushy job.