Taiwan's central bank governor said on Thursday that inflation will be the key factor in deciding whether to cut interest rates next week.

Taking questions from legislators in parliament, central bank Governor Yang Chin-long said the island's interest rates were at their highest level in 15-1/2 years.

He acknowledged that the U.S. Federal Reserve was increasingly expected to slash rates in September, but he was unwilling to make a firm commitment that Taiwan's central bank would follow the Fed's lead.

"Whether we cut interest rates depends entirely on the state of inflation," Yang said. "Rates of the U.S. are hovering at high levels, but our situation is different."

Without making any firm commitments, Yang indicated another rate increase seemed unlikely at this stage.

"It may have been an unexpected surprise when we raised the rate in March. It's not a good thing to have such surprises too frequently," said the governor.

Taiwan's consumer price index in April rose 1.95% year-on-year, below analysts forecasts, and the government said inflation is easing mildly.

The central bank, at its quarterly board meeting in March, surprised markets by raising its policy rate to 2% from 1.875%, wary of continued inflationary pressures and ahead of a rise in electricity prices.

The central bank holds its next rate-setting meeting on June 13.

Taiwan's statistics office said last week the trade-reliant economy was expected to grow at a faster pace in 2024 than previously forecast, owing to high demand for artificial intelligence (AI) applications abroad and solid consumption at home. (Reporting by Faith Hung and Liang-sa Loh; Editing by Stephen Coates and Sam Holmes)