The Central Bank of China (CBC, Taiwan's central bank) is in the process of raising interest rates amid growing concerns about rising inflation caused by higher global oil and food prices. The most recent interest rate increase took place on March 31st, when the CBC raised its main policy interest rate, the discount rate, by 12.5 basis points to 1.75%. The central bank will raise rates only cautiously during the year, in part because inflationary pressures in Taiwan will remain benign, but also owing to concerns about the sustainability of the global economic recovery, amid ongoing problems in sovereign debt markets in the euro zone. The CBC will keep a careful eye on developments and policy changes in the US and the euro zone. Assuming that domestic and global economic recoveries remain on track, we expect the CBC to continue to tighten policy in the forecast period.