MANILA, Philippines--For the third consecutive time, the Bangko Sentral ng Pilipinas has maintained its policy rates at historic lows in the belief that the economy still needed a boost from a low-interest rate environment to fully recover from the adverse impact of the recent global turmoil.

Emerging from the policy rate-setting meeting of the Monetary Board of the central bank, Governor Amando Tetangco Jr. said in a briefing Thursday that the existing policy rates were still deemed appropriate at the moment.

?Keeping the policy rates steady will help support domestic demand, including the reconstruction efforts of the government, and economic activity in the near term,? Tetangco said.

The decision of the Monetary Board not to touch the overnight borrowing rate kept it at 4 percent. The overnight lending rate was also maintained at a historic low of 6 percent. The BSP normally keeps a spread of 2 percentage points between its overnight borrowing and lending rates.

In response to the drag caused by the global economic downturn on emerging markets like the Philippines, the BSP implemented a series of policy rate cuts totaling 200 basis points (two percentage points) from December 2008 to July this year.

The objective of the rate reductions was to influence banks to also cut their lending rates, thereby encourage borrowings by households and corporations to boost consumption and investments, monetary officials said.

Since the policy rate-setting meeting in August, however, the BSP paused from the rate reductions given the early signs of a global economic recovery. In the second quarter, the local economy grew 1.5 percent, slightly rebounding from the 0.6-percent growth in the first quarter.

Nonetheless, the central bank said it did not have to raise interest rates, arguing that the economy still needed a lift to accelerate its relatively mild growth.

In the same press briefing, BSP Deputy Governor Diwa Guinigundo said inflation was projected to average at 3.28 percent this year and 4.02 percent in 2010, well within the official inflation targets set by the BSP.

The central bank wants to limit inflation to a range of 2.5-4.5 percent this year and 3.5-5.5 percent in 2010. For 2011, Guinigundo said inflation was projected at 3.4 percent.

Some economists have branded the central bank as too conservative in the conduct of monetary policy, claiming it could actually reduce its policy rates some more to allow a much faster growth for the economy.

In response, Guinigundo said the central bank could not simply be aggressive in reducing its policy rates without taking into account factors that could create inflationary pressures.

?We are already seeing signs of improvement in the global and domestic economies. Financial markets have started to improve and foreign exchange inflows are on the rise. These are building blocks of demand pressures, and so the BSP needs to be forward looking by monitoring possible buildup of inflationary pressures,? Guinigundo said.

The central bank official said the current policy rates were deemed enough to allow growth without causing inflation to spiral.