THE BANGKO SENTRAL NG Pilipinas maintained yesterday its key policy rate at a record low of 4 percent, saying it was not yet time to tighten monetary policy given the economy?s modest growth.

However, the BSP raised its rediscounting rate by 50 basis points to 4 percent, its first move to gradually exit from an accommodative policy stance.

The central bank?s overnight lending rate of 6 percent was also maintained.

?In its assessment of prevailing economic and financial conditions, the Monetary Board emphasized that the current monetary policy stance remains appropriate,? BSP Governor Amando Tetangco Jr. said in a press briefing following the policy rate-setting meeting of the central bank?s Monetary Board.

However, Tetangco noted that since ?the risk of contagion from global financial stresses markedly reduced, with the sustained stability in global financial markets, the need for more liberalized pricing of rediscount loans is now less.?

The key policy rate of 4 percent, which is the overnight borrowing rate, is the interest paid by the BSP on deposits placed by banks with the central bank. The overnight lending rate is charged by the BSP for overnight loans to banks.

Earlier, Tetangco said the central bank would implement an exit program from its accommodative monetary stance by first reversing liquidity measures, including the earlier cut in the rediscounting rate and the increase in the rediscounting budget, before raising the key policy rate.

The 4-percent overnight borrowing rate of the BSP has been in place since July last year. The rate was brought down from 6 percent to a record low following a series of interest-rate cuts from December to July.

The objective of the rate reduction was to influence banks to reduce their own lending rates, thereby encourage borrowings. Monetary officials said growth in bank lending was needed to boost consumption and investments and, in turn, help the economy avoid a recession.

They credit the low interest-rate environment for the economy?s growth last year.

Meantime, the BSP also said that inflation this year would be faster than its earlier projection.

The BSP raised its inflation forecast for 2010 to 4.7 percent from 4 percent, factoring in recent price developments, including those in the international market that affect domestic prices.

Prices of food products, oil and other commodities inched up late last year partly due to a pick-up in demand as the world and domestic economies recover from the global crisis.