The move by Taiwan follows two interest rate hikes by Malaysia earlier this year and a recent rate increase by New Zealand as central banks in the region are starting to remove monetary stimulus from their respective economies.
Taiwan last month raised its 2010 GDP growth projection to 6.14 percent from 4.72 percent, and its annual inflation forecast to 1.4 percent from 1.27 percent, according to Bloomberg News. The country's jobless rate currently rests at a 17-month low.
Taiwan and China are expected to sign a landmark trade agreement next week that would lower tariffs and expand trade between the two countries. China is Taiwan's largest trading partner.