“The level of interest rates in Taiwan is still reasonable and we believe that, so far, the interest rate is not adversely affecting our future economic development,” Chen said in an interview in Sydney, where he was attending the Asia-Pacific Economic Cooperation forum. “I think” the economy can handle higher interest rates, he said.

The island’s inflation rebounded to a six-month high in August after three typhoons destroyed crops, boosting food costs. Consumer prices climbed 1.59 percent from a year earlier, the statistics bureau said Wednesday.

Taiwan’s central bank raised the benchmark interest rate by a quarter percentage point to 3.125 percent in June, a bigger increase than economists had expected.

“The economy is not severely affected by the increase in prices,” Chen said.

Central bank Governor Perng Fai-nan doesn’t see it as “appropriate” to consider any monetary policy measure on accelerating inflation. The main cause of higher prices is a result of an increase in raw material costs, Chen said, citing an exchange with the central bank chief “several weeks ago.”

Taiwan is studying a plan to abolish its preferential tax treatment for companies, and use the surplus revenue to fund a corporate income tax cut across all industries, Chen said.

Many major semiconductor manufacturers and flat panel display makers are among Taiwan companies that currently enjoy preferential tax treatment.

The government plans to cut corporate income tax to less than 16.5 percent from the current 25 percent, the Commercial Times reported yesterday, citing Council for Economic Planning and Development Chairwoman Ho Mei-yueh.

“This idea is still under review,” Chen said. “We ministry needs to ensure if Taiwan can continue to maintain its competitive situation when it comes to the investment climate. We have to consult the business community to see their reaction and position on this issue.”