MANILA: The Philippine central bank left key interest rates steady on Thursday, as it balanced the need to support an economy facing renewed coronavirus curbs with concerns about rising inflation.

The Bangko Sentral ng Pilipinas (BSP) kept the rate on the overnight reverse repurchase facility at a record low of 2.0% for the third consecutive meeting, as predicted by all 13 economists in a Reuters poll.

The rates on the overnight deposit and lending facilities were also held steady at 1.5% and 2.5%, respectively.

The government reimposed stricter rules on movements in the capital Manila and nearby provinces this month, threatening hopes for an economic rebound. But there are concerns further monetary easing could fuel inflation which hit a 26-moth high last month.

While inflation is likely to remain elevated in the coming months, after hitting a 26-month high of 4.7% in February, he said baseline projections show the headline number returning to within the target range of 2%-4% over the policy horizon as supply-side influences subside.

The BSP raised its inflation forecasts to 4.2% this year from 4.0% previously, and to 2.8% for next year from 2.7%.

“The Monetary Board is of the view that the manageable inflation outlook continues to allow the BSP to maintain an accommodative policy stance,” BSP Governor Benjamin Diokno said in a news briefing.

Despite the recent acceleration in consumer price increases, driven mainly by food supply-related factors, the risk to the inflation outlook “appears to be broadly balanced” in 2021 and is leaning “toward the downside in 2022”, Diokno said.

The BSP’s decision complements “crucial fiscal policy measures in supporting economic activity and market confidence”, he added.

Diokno also said the ongoing pandemic may continue to pose downside risks to demand and to the inflation outlook.