TAIPEI -- Taiwan's central bank raised its benchmark interest rate on Thursday for the second consecutive quarter, as it joins other global monetary authorities in tightening policy to quell surging inflation.

The 12.5 basis point increase to 1.5% follows a 25 basis point hike the previous quarter. Taiwan's consumer price index rose 3.39% in May from a year earlier -- its fastest climb in nearly a decade and above the central bank's 2% target for the 10th straight month.

"Given the pressure of global inflation and the high downside risks of the economy, the Bank will pay close attention to the impact of geopolitical risks such as the conflict between Russia and Ukraine, changes in international raw material prices, the evolution of the pandemic etc on the domestic price situation, as well as the development of tightening monetary policies in major economies," the bank said in a statement.

Elsewhere, the U.S. Federal Reserve on Wednesday launched its biggest broadside yet against inflation, raising its benchmark by 75 basis points; the European Central Bank has announced plans for a 25 basis point hike next month; and Asian central banks from South Korea and Singapore to New Zealand and Sri Lanka are tightening policy.

There are three main reasons why the hike was small, said Darson Chiu, a research fellow at the Taiwan Institute of Economic Research (TIER).

"First, Taiwan's inflation is not as serious as that of the United States, so there is no need to compare the magnitude of the United States; second, Taiwan's inflation is imported inflation, and there is no overheating situation, so the Fed's interest rate hike has been able to restrain international raw material prices; third, the pandemic in Taiwan has already had an impact on the domestic market, so the central bank must also take into account the possibility of economic slowdown."

Taiwan's Economic Affairs Minister Wang Mei-hua said Tuesday that controlling inflation is not only about interest rate rises.

Inflation had begun to slow in Taiwan last year, but a COVID-19 surge, Russia's invasion of Ukraine and lockdowns in China fueled price rises again, Wang said in an interview with local media.

In late May, the Directorate General of Budget, Accounting and Statistics lowered its forecast for Taiwan's 2022 gross domestic product growth to 3.91% percent from 4.42% estimated in February.

The central bank also lowered its growth projection to 3.75%, from a 4.05% forecast in March.