MANILA (UPDATE) - The Bangko Sentral ng Pilipinas kept interest rates steady, in line with analysts forecasts given what it sees as a "benign inflation environment".

The BSP paused monetary easing after making a surprise rate cut last month.

The Bangko Sentral kept the rate on the overnight reverse repurchase facility at a record low of 2 percent. The rates on the overnight deposit and lending facilities were likewise kept at 1.5 percent and 2.5 percent, respectively.

The monetary board’s decision was a result of its last policy setting meeting for the year.

"The monetary board believes that an accommodative monetary policy stance, together with sustained fiscal initiatives to ensure public welfare should quicken the economy’s transition toward a sustainable recovery. Looking ahead, the BSP remains committed to deploying its full range of instruments as needed in fulfillment of its mandate to maintain price and financial stability conducive to growth," it said in a statement.

The BSP has reduced interest rates by a cumulative 200 basis points this year, and cut the reserve requirement ratio (RRR) for banks by 200 basis points to 12 percent.

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The BSP likewise adjusted upwards its inflation forecast for 2020 and 2021.

"The baseline for 2020 now stands at 2.6 percent compared to 2.4 percent in the November meeting on monetary policy of the board. For 2021, we have revised it to 3.2 percent compared to 2.7 percent previously," BSP Deputy Governor Francisco Dakila said.

Some economists have said monetary policy can only do so much, and that what was needed was for the government to substantially boost spending to stimulate the economy.

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From January to September, the Philippine GDP contracted 10 percent compared to the same period last year, as the COVID-19 pandemic disrupted businesses and industries.

Economic managers see the GDP contracting by up to 9.5 percent this year, but expect it to rebound in 2021.

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- with a report from Reuters