MANILA, Philippines?Bank lending rates fell further in February, at a pace faster than the drop in the central bank?s own policy rates.

This, according to regulators, should prompt credit growth in the country to accelerate in 2010.

According to a report from the BSP, the average interest rate on all types of bank loans stood at 7.049 percent during the survey period from Feb. 15 to 19.

This was 2.23 percentage points lower than the 9.272 percent registered as of December 2008, when the BSP started its policy rate reductions to pump prime the economy amid the worsening global crisis at that time.

The BSP said the drop in interest rates charged by banks exceeded the 2-percentage point cut in its key policy rates. From December 2008 to July 2009, the central bank implemented a series of policy rate cuts that totaled 2 percentage points.

The central bank?s overnight borrowing rate?which is the amount paid by the BSP for overnight deposits by banks?was cut from 6 to 4 percent. The overnight lending rate?which is the amount charged by BSP on banks that borrow from it?was reduced from 8 to 6 percent.

?The cumulative 200-basis-point (2-percentage-point) policy rate cut of the BSP from Dec. 18, 2008 to July 9, 2009 have been passed on by banks to their borrowers,? the BSP said in the minutes of a Monetary Board meeting.

Central bank officials said the fact that banks had substantially reduced their lending rates indicated that the objectives of the monetary policy were met. They said the low interest-rate environment should cause bank lending to sustain or surpass last year?s 10-percent growth.

The BSP earlier reported that outstanding peso-denominated loans extended by banks stood at P2.15 trillion as of end-2009, up 10 percent year-on-year.

The cut in the BSP rates was meant to encourage banks to trim the interest rate they charge on individual and corporate borrowers. Officials said lower interest rates should encourage borrowings, which in turn should support consumption and investments, and save the economy from recession.

Last year, the Philippine economy, measured in terms of gross domestic product, grew by 0.9 percent and avoided a much-feared recession. The growth, however, was a stark deceleration from the 3.9 percent registered the previous year.

Earlier, BSP Governor Amando Tetangco Jr. said the central bank was likely to keep its key policy rates at 4 and 6 percent in the first semester, noting the still minimal growth of the economy and the absence of substantial inflationary threats.

However, traders and economists expect the BSP to increase its key policy rates by the second half as inflationary pressures start building up with the recovery of the global economy.

Low interest rates?since these encourage borrowings, consumption and investments?tend to boost demand and trigger increase in inflation if kept for too long.