MANILA (UPDATE) - The Bangko Sentral ng Pilipinas on Thursday cut its policy rate by another 50 basis points, bringing the benchmark to a record low of 2.25 percent.

BSP Governor Benjamin Diokno said that the Monetary Board noted that while inflation remains benign, "global economic recovery would likely be protracted and uneven," thus the need to continue measures to boost economic activity.

“Given these considerations, the Monetary Board decided that a further reduction in the policy rate amidst a benign inflation environment would help mitigate the downside risk to growth and boost market confidence,” Diokno said.

The BSP first cut rates by 25 bps in February. This was followed by a 50 bps cut in March, and another 50 bps cut in April in the middle of the enhanced community quarantine imposed to curb the spread of COVID-19 over Luzon and other areas.

Thursday’s rate cut brought the cumulative rate cuts this year to 175 basis points.

Economists polled by Bloomberg earlier forecast the Bangko Sentral would keep rates steady.

"They’ve cut rates quite substantially so far and they have to wait to see the monetary policy transmission that has happened because of the rate cuts," Standard Chartered economist Chidu Narayanan told ANC's Market Edge earlier Thursday before the central bank's decision.

BSP Deputy Governor Francisco Dakila meanwhile said that the rate cuts are meant to help boost lending and economic recovery in the coming months.

“We expect lending to pick up in the months ahead as restrictions that have been imposed following the quarantine period are continuing to be relaxed,” Dakila said.

Last March, the BSP also reduced the reserve requirement ratio for banks by 200 basis points, pumping more liquidity into the system.

Dakila said the Philippines’ RRR remains one of the highest in the region and “there may be room to accelerate RRR adjustments should the need arise.”

The BSP meanwhile raised its inflation forecast this year to 2.3 percent from an earlier forecast of 2.2 percent in May. For 2021, the BSP now sees inflation averaging 2.6 percent, from an earlier forecast of 2.5 percent in May.

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Measures implemented to check the spread of the virus have hit the country's economy hard, causing the first gross domestic product contraction in 22 years and pushing unemployment to a record 17.7 percent.

The Philippine economy shrank in the January-to-March period, a first since 1998.

The April to June period will likely be worse than the first quarter as the full toll of the coronavirus lockdown is reflected, an economist has said.