UPDATE 1-Philippine cbank keeps rate at record low as COVID risks linger

* BSP keeps key rate at 2.0% for fifth meeting

* Peso little changed after rate decision (Adds comments, background)

MANILA, June 24 (Reuters) – The Philippine central bank left its benchmark interest rate at a record low on Thursday as it sought to keep monetary policy accommodative to support the economic recovery amid heightened COVID-19 restrictions in some areas.

The Bangko Sentral ng Pilipinas (BSP) kept the rate on the overnight reverse repurchase facility at 2.0% for a fifth consecutive meeting, citing lingering downside risks to growth.

All 11 economists in a Reuters poll expected the central bank to keep rates at record lows to support the economic recovery.

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

“Economic activity has improved in recent weeks, but the overall momentum of the economic recovery remains tentative as the threat of COVID-19 infections continues,” BSP Governor Benjamin Diokno told a news briefing.

“Downside risks to the inflation outlook continue to emanate from the emergence of new coronavirus variants, which could delay the easing of containment measures and temper prospects for domestic growth,” he said.

Diokno reiterated the central bank would continue to support the economy for as long as necessary, brushing aside for now the U.S. Federal Reserve’s signals for an earlier-than-expected policy tightening.

A resurgence in COVID-19 infections in some parts of the Philippines prompted the government to reimpose stricter lockdown measures around the middle of this month, while some mobility curbs have been kept in place in the capital region until end-June despite new daily cases having plateaued.

Diokno said the inflation outlook remained “broadly balanced”, expecting the average for this year to be near the upper end of the target range of 2%-4% in 2021, and ease toward the midpoint of the target band for 2022 and 2023.

Inflation has been stable at 4.5% for the last three months.

The Philippine peso was largely unchanged after the central bank decision. It earlier slid to a near three-month low and led losses among emerging Asian currencies.

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