FACTORS TO WATCH Governor Amando Tetangco has been saying the central bank was willing to ease monetary policy by cutting interest rates, bank reserves, or both, should the outlook for the global economy deteriorate significantly. With inflation expected to continue easing this year, the BSP may consider cutting its key policy rate on Thursday for the first time in 2-1/2 years to boost domestic demand and protect the economy from global shocks. Eleven of 13 economists in a Reuters poll see a 25 basis point cut in overnight rates at the central bank's first policy meeting for the year. Some forecast a second, similar-sized cut before end-June, which would bring the policy rate back to the 4 percent level seen during the 2009 global crisis, a record low. Economists betting on steady rates argue liquidity in the financial system was still ample, and the possible risks to the inflation outlook coming from geopolitical tensions in Iran and highe roil prices may prompt the central bank to think twice about reducing rates. Some economists also predict the central bank may cut banks' required reserves in line with its ongoing review of the structure of these reserves, now at 21 percent. Thursday's policy meeting comes more than a week before the government releases GDP data, which some economists expect to show full-year growth in 2011 at below 4 percent, lower than a government target of 4.5 to 5.5 percent, and against 7.6 percent growth in 2010. The Philippine economy lost significant momentum last year due to underspending by the government and a sharp decline in exports following supply chain disruptions and as the weak global economy dampened demand for the country's electronic and semiconductor products. Annual inflation cooled to an 11-month low in December, reinforcing the central bank's view of a manageable inflation outlook over the policy horizon, and allowing a shift in focus towards boosting growth. To help spur economic activity, the government said it would frontload spending in its 1.8-trillion-pesos ($41 billion)budget for 2012 to build roads, school buildings and other major infrastructure projects early in the year. It aims to grow the economy between 5 to 6 percent this year. Last week, Indonesia and South Korea both held their key policy interest rate steady as worries about inflationary pressures trumped concerns over sluggish global growth. MARKET IMPACT: The market has fully priced in a 25 basis-point cut, so any impact on bond yields, and the peso may be limited. But a decision to leave interest rates unchanged could spur profit-taking in bonds.