Taiwan's central bank announced on June 30 a decision to raise the discount rate, the rate on accommodations with collateral, and the rate on accommodations without collateral by 0.125 percentage points. According to Fai-Nan Perng, governor of Taiwan's central bank, the US economy has not been recovering as expected. Perng pointed out despite the slow recovery of the developed economies, Taiwan will raise key rates because emerging economies have been growing steadily. The risk of global inflation still exists, hence the bank's decision of tightening the money supply by raising interest rates, stated Perng. Perng emphasized the exchange rate, on principle, fluctuates with supply and demand of the currencies. The central bank will only interfere when the exchange rate shows unusual fluctuations due to irregular factors such as weather and short-term massive increase of funds that can cause instability. From statistics, Taiwan has been effective in controlling imported inflations as the annual increase of CPI was only 1.4%, far lower than 4.3% in South Korea. However, the appreciation of Taiwan's currency obviously has been affecting the exports negatively. Perng stated the appreciation is a double-edged sword, and the bank will hold a careful balance with all efforts.

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