THE Bangko Sentral ng Pilipinas yesterday decided to keep its key policy rates steady, citing the need to further boost the economy?s modest growth.

?The Monetary Board?s decision is based on its view that the current monetary policy settings remain appropriate. Keeping policy rates unchanged could also encourage further investment and borrowing activities,? said BSP governor Amando Tetango Jr. shortly after the last policy rate meeting for the year.

From December 2008 to July 2009, the BSP slashed overnight borrowing and lending rates to historic lows of 4 percent and 6 percent, respectively. Yesterday, the central bank kept the same rates.

The series of rate cuts was meant to influence banks to reduce their own lending rates and encourage borrowings. Monetary authorities said borrowings should support consumption and investments, which in turn would fuel growth.

At the moment, there is no pressing need for the central bank to reverse its key policy rates. Raising the central bank?s interest rate at this time may stifle the economy?s recovery, Tetangco said in yesterday?s briefing.

Officials said the BSP?s monetary policy could help the economy maintain its growth momentum into 2010 by keeping its policy rates at historic lows. The BSP still has room to keep the rates low as inflation remains benign.

According to BSP estimates, inflation will average at 3.3 percent this year and 4 percent next year.

These are well within the official target ranges of between 2.5 and 4.5 percent for this year, and between 3.5 and 5.5 percent next year.

Tetangco said inflation would remain within tolerable levels. And as long as inflation falls within official targets, then the BSP may continue to help boost the economy by keeping its key policy rates low.