The Bangko Sentral ng Pilipinas (BSP) on Thursday trimmed its key interest rates to its lowest level to aid the recovery of the Philippine economy in the face of the coronavirus disease 2019 (Covid-19) pandemic.

The BSP’s Monetary Board in its seventh rate-setting meeting this year trimmed the

overnight borrowing, lending and deposit rates were cut by 25 basis points (bps) to 2.0 percent, 1.50 percent and 2.50 percent, respectively.

BSP Governor Benjamin Diokno said in a virtual briefing that the recent surge in Covid-19 cases globally has led to less optimism on possible economic recovery.

“Monetary authorities also observed that global economic prospects have moderated in recent weeks,” he added.

Diokno said the country’s economic recovery could also be affected by the impact of the recent typhoons, taking also into account that the Philippine gross domestic product (GDP) contracted by 11.5 percent in the third quarter.

With the 11.5-percent contraction in July to September and country’s GDP dropping by 9 percent in the first quarter and 16.9 percent in the second quarter, the country’s economy contracted by 10 percent in the first nine months of the year.

“With a benign inflation environment and stable inflation expectations, the Monetary Board sees enough policy space for a reduction in the policy rate at this juncture to uplift market sentiment and nurture the country’s economic recovery amid increased downside risks to growth,” Diokno said.

The BSP has already adjusted upward its inflation forecast for 2020 from 2.3 percent to 2.4 percent. For next year, the BSP adjusted its inflation outlook from 2.8 percent to 2.7 percent, and from 3.0 percent to 2.9 percent in 2022.

The factors cited for increased inflation rate this year include effects of the African swine fever on livestock product prices, and the strong typhoons that caused massive economic damage.